Emerson ism Dissertation

International School of Management

The Effects of Employee Satisfaction and Customer Retention on Corporate

Profitability: An Analysis of the Service-Profit Chain

by

Anthony L. Emerson

Doctoral dissertation submitted for the International School of Management’s Doctor of

Business Administration degree

Word Count: 91,611

April 2007

LIST OF CONTENTS

Acknowledgements i

List of Figures ii

Notations iii

Abstract v

Executive Summary vi

Page

Chapter 1 – Introduction 1

Chapter 2 – The Elements of Employee Satisfaction 5

Leadership-Management Attitude/Response 5

Work Environment 8

Employee Training/Programs 14

Employee Development & Leadership Planning 20

Employee satisfaction and Recognition 25

Organizational Goals and Employee Expectations 33

Communicating With Employees 37

Employee Satisfaction and Teamwork 48

Employee Empowerment 53

Interaction in the Workplace 60

Organizational Culture/Employee Focused 65

Employee Benefits 73

Page

Employee Motivation 77

Chapter 3 – Increased Employee Satisfaction Leads to Increased 83

Creativity and Innovation

Innovation Process Examples to Learn From 85

Suggestions for Improving the Innovation Process 87

Apple: An Example of Creativity and Innovation 88

Chapter 4 – Customer Service Loyalty and Retention 89

The Customer-Centric Organization 90

Customer Acquisition-Branding & Marketing 93

Customer Acquisition and the Internet 94

Target Marketing 98

Delivering World-Class Customer Service 101

Customer Expectations 103

Training for Customer Service 110

Customer Service Training at the Disney Organization 113

The Important Elements of Delivering Great Customer Service 116

Exceptional Customer Service at the Ritz-Carleton 123

The Employee-Customer Relationship 127

The Customer-Employee Relationship at Pike Place Fish Market 131

Page

Transforming Customer Satisfaction Into Customer Loyalty 134

Measuring Customer Satisfaction 142

Chapter 5 – Knowledge Management & Customer Relationship 149

Management Systems

What is Knowledge Management? 150

Customer Relationship Management Systems 154

The Need and Benefits of CRM Systems 155

CRM Systems Implementation 163

Potential CRM Pitfalls 169

CRM at Amazon.com 172

Chapter 6 – The Effects of Employee Satisfaction-Customer 178

Retention on Profitability

The Effects of Customer Loyalty on Corporate Profitability 180

Customer Loyalty is a Direct Result of Customer Satisfaction 181

Creating Value Through Satisfied, Loyal, & Productive Employees183

Satisfied Employees’ Impact on Customer Loyalty & Profitability 184

Page

Chapter 7 – An Analysis/Evaluation of the Service Profit Chain at 186

Maine Savings

Maine Savings History 187

Leadership at Maine Savings 188

Leadership-Management Attitudes/Response 189

Work Environment 191

Employee Training/Programs 194

Employee Development & Leadership Planning 199

Employee Satisfaction and Recognition 201



Employee Satisfaction and Teamwork at Maine Savings 211



Organizational Culture/Employee Focused 222



Chapter 8 – Customer Service, Loyalty, and Retention at Maine 234

Savings

Maine Savings as a Customer-Centric Organization 234

Page

Customer Acquisition – Branding & Marketing 237

Maine Savings Customer Acquisition and the Internet 241

Target Marketing at Maine Savings 242

Delivering World-Class Customer Service at Maine Savings 244

Training for Customer Service at Maine Savings 245

Important Elements of Customer Service at Maine Savings 247

The Employee-Customer Relationship at Maine Savings 252

The FISH Philosophy at Maine Savings 256


Measuring Customer Satisfaction at Maine Savings 261

Knowledge Management Strategies at Maine Savings 264

Knowledge Management Instruments at Maine Savings 265

Knowledge Management Barriers Identified at Maine Savings 266

Customer Relationship Management at Maine Savings 270

Chapter 9 – A Summary of the Service Profit Chain Initiative at 272

Maine Savings

The Benefits of Added Employee Satisfaction at Maine Savings 273

The Benefits of Increased Customer Satisfaction at Maine Savings 276

Resultant Effects on Corporate Profitability at Maine Savings 282

Page

Chapter 10 – Academic Literature Review 282

Overview 282

Employee Satisfaction 284

Customer Satisfaction 286

Customer Loyalty 289

Corporate Profitability and the Service Profit Chain 290

Chapter 11 – Research Methodology 291

Objectives 291

Research Approach 292

Method & Data Collection 293

Selection and Description of Interviewees 294

Chapter 12 – Interview Results 296

CEO, Vice Presidents and Board Members 296

Service Profit Chain 296


Customer Satisfaction/Retention 302

The Combination of the Elements of the Service Profit Chain 307

Interview Results Summary 310

Page

Chapter 13 – Summary, Discussion, Conclusions, and Limitations 310


Leadership-Management Attitude Response 311

Work Environment 312

Employee Training 314

Employee Development and Leadership Planning 315

Employee Recognition 316



Employee Satisfaction and Teamwork 321





Customer-Centricity 327

Customer Acquisition-Branding & Marketing 327

World-Class Customer Service 329

Customer Expectations 331

Customer Service Training 332

The Employee-Customer Relationship 333


Page

Measuring Customer Satisfaction 336

Customer Relationship Management 337

Creating Value Through Satisfied, Loyal & Productive Employees 339

Customer Loyalty Effects on Corporate Profitability 341

The Service Profit Chain at Maine Savings, Discussion 343

Limitations 343

Chapter 14 – Recommendations & Where, When, How, and Why 344

Bibliography 355

Appendices 381

ACKNOWLEDGEMENTS

I would like to thank the many business executives, college professors, and business

scholars that helped me identify, analyze, and choose this topic. I would especially like to

thank all of the employees at Maine Savings for their generous gift of time and attention

to my many inquiries as I pursued this research. In particular, I would like to recognize

the members of Maine Saving’s Executive Team for their many hours of input during

interviews and their contribution to my data gathering efforts.

I would also like to thank my family for their support, understanding, and flexibility as I

undertook this task. I would like to especially thank my Son Anthony who spent many

long hours next to me as I endeavored to compile my research. I would be remiss if I did

not mention the appreciation I have for the outstanding program of study at the

International School of Management, for which I am grateful. I would like to especially

thank Professor Peter Horn, PhD. for his input, support and patience during my time in

the DBA program.

i

LIST OF FIGURES

Figures Page

Figure 1 Maslow’s Hierarchy of Needs 25

Figure 2 Organization Strategy 33

Figure 3 Organization Environment 33

Figure 4 Performance Management 34

Figure 5 Leadership for Empowerment 54

Figure 6 Management/Employer Performance Cycles 67

Figure 7 Employee Motivation 78

Figure 8 Motivational Theories 79

Figure 9 Motivation & Satisfaction Levels 80

Figure 10 Maslow’s Hierarchy of Needs (illustration) 81

Figure 11 Customer Acquisition/Experience Model 98

Figure 12 Customer Perceived Value 137

Figure 13 Customer Loyalty Pyramid 140

Figure 14 Adoption Factors for Knowledge Management Systems 151

Figure 15 Purposes for Knowledge Management Systems 152

Figure 16 Static Knowledge Management 153

Figure 17 Automated Knowledge Management 153

Figure 18 Reasons to Implement CRM Strategies 156

Figure 19 CRM Risk Tolerance 168

ii

NOTATIONS

ACH Automated Clearing House

AVP Assistant Vice President

B2B Business to Business

B2C Business to Customer

CE Corporate Entrepreneurship

CEO Chief Executive Officer

CFO Chief Financial Officer

CPV Customer Perceived Value

CRM Customer relationship Management

CSM Customer Service Management

DP Data Processing

EAP Employee Assistance Program

ERP Employee Response Program

HR Human Resources

IT Information Technology

KM Knowledge Management

MBO Management by Objective

MS Maine Savings

NI Net Income

NPV Net Present Value

OTJ On the Job

PAT Process Action Team

iii

PFI Primary Financial Institution

PTO Paid Time Off

R&D Research and Development

ROA Return on Assets

ROE Return on Equity

ROI Return on Investment

SOP Standard Operating Procedure

US United States

VP Vice President

iv

Abstract

The elements that lead to employee satisfaction and customer retention are said to have

fundamental implications for corporate profitability. Unlike much of the mainstream

literature, which generally focuses on the relationship between two of these three subjects

(employee satisfaction, customer retention, and corporate profitability), this paper

considers the effects, importance and reliance between all three. Based on published

research, completed case studies, and interviews, the paper emphasizes the effects of

employee satisfaction and customer retention on corporate profitability, otherwise known

as the Service-Profit chain. It especially highlights the importance of the link, and

subsequent success of each area. It argues that, in order to be effective, a complete

understanding of the link between employee satisfaction and its relationship to customer

retention and corporate profitability must be understood and practiced.

v

Executive Summary

Most every organization must deal with the issues of employees, customers and

profitability in the normal course of carrying out business. This paper considers each

issue, but in relation to how they correlate with, and affect each other. More and more

research is being done in regard to the effects of employee satisfaction and customer

retention on corporate profitability, and the importance of this relationship. The focus of

this paper is to fully define each issue, highlight the important relationship between each,

and offer dynamic recommendations to improve the benefits of their correlation. This

will be accomplished by analyzing published research, interviews with established

professionals in the field, and case studies related to employee satisfaction, customer

retention, and corporate profitability.

The research on employee satisfaction is constantly evolving, with new points of view

and strategies emerging on a regular basis. In fact, there are a plethora of books that have

been written on the subject. This paper will analyze the various components of employee

satisfaction, as well as the key drivers involved in employee fulfillment. The results of

this analysis will be used to examine the relationship between a “satisfied” employee and

effective customer retention and loyalty. The paper highlights the major considerations

for retaining customers, and the relationship between satisfied employees and loyal

customers.

vi

In the end, the issues of employee satisfaction and customer retention are examined in

relation to their impact and influence on corporate profitability. This paper will analyze

and focus on the touch points that must be considered in the relationship between each

issue. The paper will conclude that there is a direct and fundamental link in the

relationship between employees, customers and corporate profitability. The paper also

concludes that an organization can benefit from enhancing these elements that make up

what is known as the “service-profit” chain. After analyzing the research contained

herein, the reader should be able to conclude that there is attainable value in combining

these elements into a synergistic system for the benefit of the organization.

vii

The Effects of Employee Satisfaction and Customer Retention on Corporate Profitability: An Analysis of the Service-Profit Chain

Chapter 1

Introduction

For many years now, research has been conducted on the effects of employee satisfaction

and the correlation to categories such as: productivity, turnover, customer loyalty, and

profitability. The aim of this paper is to examine the effects of employee satisfaction and

customer retention on corporate profitability, often referred to as the “service profit

chain.” These three elements are the main touch points in business that account for a

majority of all organizational processes. The empirical literature is clear that if

organizations concentrate on employee satisfaction elements, positive effects on customer

satisfaction and corporate profitability can be realized (Levine 1995). The analysis in this

paper will highlight the integral relationship between employee satisfaction, customer

retention, and corporate profitability. It will outline a clear and direct link between these

elements, as well as provide evidence of the benefits to an organization that makes these

elements a priority.

In order to sufficiently examine the service profit chain, each of the three elements will

be comprehensively analyzed and defined. The main tenets and elements of employee

satisfaction will be discussed in relation to one another, as well as how they fit together to

achieve the desired result. In much the same fashion, the elements of customer

satisfaction will be analyzed in relation to both employee satisfaction tenets and potential

effects on profitability. An in-depth examination of the relationship between employee

satisfaction and customer retention and their effect on corporate profitability will be

presented. The paper considers the theoretical research and analysis on this subject, as

1


well as comparisons to actual case studies on the Ritz-Carleton organization, Pike Place

Fish Market, the Disney Company, and Amazon.com. In addition, an analysis of the

current service profit chain initiatives being carried out at Maine Savings will also be

examined. The combination of theory, case study analysis, and physical observation will

enhance the foundation and serve to support the main hypothesis of this paper.

The information in this paper will be presented in the context of achievable initiatives

that are capable of being implemented at most present day organizations. Although

previously published empirical research data will be used to support the analysis

presented in this paper, the data will be presented in a context relevant to businesses

today. The paper will also attempt to answer the question, “If it is so easy, why aren’t all

companies doing it?” Several of the reasons for this will be given and examined relative

to the elements of the service profit chain. In the end, the reader will be able to assess the

processes, elements, and benefits of instituting a service profit chain initiative that

focuses on the effects of employee satisfaction on customer retention and corporate

profitability (Appendix 1).

The Service Profit Chain

Employee Satisfaction

The three main components of the service profit chain theory are employees, customers,

and profitability. This section focuses on the place and importance of employees to the

process that makes up the overall theory. The specific components of “employee

satisfaction” will be discussed later in further detail. As most everyone in business is

2


aware of, employees are important to any organization, as they are the foundation for any

potential productivity. Employee satisfaction has been directly linked to employee

loyalty. Because employees can be considered the heart of an organization, management

should consider investments in employee satisfaction and subsequent loyalty, to be a

necessity. Most organizations fail to take into account the loss of productivity and a

decrease in customer satisfaction that results from poor employee satisfaction and

increased employee turnover (Heskett, Sasser and Schlesinger 1997). This paper will also

highlight the negative effects of low employee productivity that are a result of employee

dissatisfaction in the section that will address the link between employee satisfaction and

corporate profitability.

Although there are three main elements to the service profit chain, customer

retention/loyalty can be considered the primary conduit between the other two. In other

words, the glue that binds the elements together and produces positive results from the

theory itself. Creating customer value is the key to attaining customer loyalty. The issue

of customer retention and loyalty is more complex than usually assumed and may be

affected by many different aspects of operations within an organization. Customer

retention is a gauge that is used to assess how well an organization is doing at creating

value for its customers (Reichheld 1996). It is widely accepted that it is far cheaper and

more efficient to have loyal, repeat customers, than to have to market and mine new

customers.

3


The major component of customer retention is “loyalty”, which is why the paper will

explore the elements of customer loyalty in more depth later in the customer satisfaction

section. However, it is important here to point out the importance of customer loyalty to

the theory of the service profit chain. Within the concept of the service profit chain, the

important point in regard to customer loyalty is that customers should be looked upon as

revenue generating assets. That is, they should be accounted for, monitored, and

proactively taken care of as any valuable corporate asset. By adopting this viewpoint, a

company is able to view customers not only as one-time events but also as long-term,

valuable assets that require attention in order to bolster their retention and satisfaction.

The third main element of the service profit chain is profitability, which is a by-product

of employee satisfaction and customer retention/loyalty. While many organizations still

focus on trimming expenses and generating new business, there is an abundance of

evidence linking customer retention to positive financial performance (Marketing

Innovators 2005). This theory has been embraced and implemented by many successful

titans of business including Jack Welch, former CEO of General Electric and Herb

Kelleher, founder of Southwest Airlines. It is not enough anymore for a company to focus

only on improving profitability; it is necessary to examine the main components that lead

to profitability. It is now recognized that the best way to improve corporate profitability

is to focus on the effective management of human capital and customer capital. As this

paper will highlight in the case studies and the ongoing efforts at Maine Savings, this

theory can be implemented successfully and profitably. Many successful managers and

4


leaders today are focusing more attention on frontline workers and their customers, rather

than the traditional items of profit goals or market share (Jones 1994).

Chapter 2

The Elements of Employee Satisfaction

Employees can derive satisfaction from their jobs by meeting or exceeding the emotional

wants and needs they expect from their work (Pepitone 2006). Therefore, Managers that

can recognize this and understand the many different aspects that are involved in

employee satisfaction will be successful at achieving the link between employee

satisfaction, customer retention and added profitability. As previously stated, the issue of

employee satisfaction has a major impact on customer retention and corporate

profitability. This section will comprehensively analyze the many important elements that

are related to employee satisfaction, and resultant employee loyalty. The paper will

consider the elements, define their concepts, and discuss the salient points in relation to

the main hypothesis that employee satisfaction has a major impact on customer retention

and corporate profitability.

Leadership – Management Attitude/Response

Although there will be many aspects of employee satisfaction discussed in subsequent

sections of this paper, the element of leadership and management’s attitude toward

employees should be considered the foundation of employee satisfaction. There is no

single definition of a successful leader or manager but recognized leaders and managers

do share many of the same traits. Jack Welch, the widely acclaimed former CEO of

5


General Electric states, “Without question, there are lots of ways to be a leader. You need

to look only as far as the freewheeling, straight-talking Herb Kelleher, who ran

Southwest Airlines for thirty years, and Microsoft’s quiet innovator, Bill Gates, to know

that leaders come in all varieties” (Welch and Welch 2005). The main point here is that

successful leaders can possess different styles, but use similar strategies to engender

employee trust, loyalty, and satisfaction. The paper will now discuss and consider several

of the successful traits exhibited by successful leaders and managers.

One would be hard pressed to argue against the fact that leaders in organizations can have

a definitive influence on employee behavior and subsequent employee satisfaction.

Employee satisfaction issues have been researched extensively. A heavily researched

topic relating to employee satisfaction is the relationship of an employee’s satisfaction

level and the leadership style of the organization (Brooke 2005). Up to this point, the

paper has combined the terms “leadership” and “management”. It should be noted that

there are distinct differences between the two, as leaders establish the vision to be

accomplished and managers monitor the performance and progress at attaining the vision.

However, for the purposes of this paper, the two terms shall be referred to synonymously

because of the way they are typically viewed by employees of an organization.

The leadership of an organization is expected to establish a vision, create parameters to

work within, monitor performance, and set the overall “tone” for employees of the

organization. A majority of the research that has been done on the topic of leadership

highlights the importance of clear communication by leadership to employees, as a key

6


factor in the success or failure of the organization. Effective leaders and management

focus on accurate communication processes with employees, and take the time, effort and

expense to ensure that the message is understood. There are several important processes

involved with effective leader-employee communication. Leaders are responsible for

creating the vision, ensuring that employees understand the message, and ensuring that

the information is being acted on as expected (Kaplan and Norton 2001). One of the most

important factors involved in communication from leaders/managers to employees is the

issue of conviction. Leaders and managers must have conviction in their message and

show that they too are complying with the content of the communications that they are

conveying to employees. This builds trust and loyalty on the part of employees that is in

turn, transferred to other factors that are part of overall employee satisfaction.

In addition to being able to effectively communicate with employees, good leaders and

managers must also possess other important traits such as: being accountable, the ability

to be trusted, approachability, and the ability to set a clear and concise vision for the

organization. Of these traits, the research most often points to the issue of trust as being

equal to, or more important than open communication. Based on published data, loyalty

and the belief in the trustworthiness of organizational leadership are interrelated

(Appendix 2). Leaders and management that work to foster trust between them and their

employees can have a positive effect on employee retention and the satisfaction of their

workforce (Burke and Collison 2004). This hypothesis is easily proven by examining the

situations involving the numerous corporate accounting scandals and executive pay

debacles that have come to light in the last few years. Although it may seem like common

7


sense, trust in an organizations leadership and management leads to reciprocal trust by

employees, and a subsequent increase in employee satisfaction.

In order to engender or improve employee satisfaction, good organizational leadership

must be able to credibly engage employees at every level, in pursuit of organizational

goals. It is not enough for an organization to exhibit leadership at the very top; it is also

necessary at every management level throughout the organization. Organizations need to

have consistent leaders at all levels in order to be successful. Effective leadership dictates

that management talent is constantly identified and developed for future leadership

positions within the organization (O’Connor 2004). As part of this leadership

development initiative, consistency and unity of message must be maintained. Leadership

that includes an understanding of employee expectations, desires and needs is necessary

in order to bolster and maintain employee satisfaction.

Work Environment

The single most important factor contributing to employee satisfaction is the internal

quality of the work environment. The respect and appreciation employees derive from

their co-workers and employers helps to determine the internal work environment (Stein

and Book 2000). The term “work environment” encompasses many different aspects such

as: physical work environment, management’s attitude toward employees, relationship

with colleagues, and working conditions. Recent research has highlighted the hypothesis

that an employee’s work environment can have a dramatic effect on his/her performance

and attitude toward work. For example, one’s workspace has traditionally been

8


conceptualized as just a passive host to its user activities. However, it is now recognized

that the space workers occupy at work effects patterns of interaction, and can have a

noticeable impact on behavior and performance. In addition to the physical attributes of a

workplace, are the attitudes of management geared toward the well being of the worker.

Does management exhibit respect, empathy, and strive to provide a hostile free work

environment for its employees? This section will comprehensively address these different

aspects as they relate to their effect on employee satisfaction.

An environment is anything that supports employees to be or to perform a certain way.

There are many elements related to a working environment. Quite often, people are not

even aware of many of the elements that make up a work environment. It stands to reason

that everything around employees has some impact on them and how they do what they

do. If there are elements of an employee’s work environment that are having a negative

effect on them, steps should be taken to remove the elements so that only positive

environmental effects remain (Fuimano 2006). This description of ‘environment’ is quite

comprehensive and expansive and therefore deserves detailed analysis and a firm

understanding by an organization striving to understand its effects on employee

satisfaction.

The first work environment issue that will be considered here is that of the physical

workspace. This issue has become so important in recent years that in 1997, the Center

for the Built Environment was created at the University of California at Berkeley. The

main mission of the foundation is to conduct research on innovative building

9


technologies that will improve the workplace productivity of commercial buildings. An

example of the work that is being done at the CBE can be found with their research into

the physical settings of workspaces geared toward teams and collaboration. Team

workspace design is done in order to specifically support the collaborative work of a

group of employees. Although the designs allow for private workspaces, there are

provisions made for open collaborative workspaces that are conducive to teamwork

(Arens 2002). Many companies today are expending greater effort to ensure that

productive, conducive work environments exist for the productivity and satisfaction of

their employees.

Rather recently, organizations have come to the realization that an employee’s physical

work environment can have a tremendous effect on their productivity and overall

satisfaction. Aspects of this realization relate to issues such as space, lighting, sound, and

ergonomically correct design. People spend 90 percent of their time indoors, and much of

that time is spent at work. Studies have shown that up to 30 percent of U.S. office

workers suffer from health problems caused by sick-building syndrome. Organizations

can create long-term value in not only the facilities themselves, but also for the

employees of the organization. Organizations can attempt to understand the

environmental implications for employee productivity and satisfaction if they are

considered essential elements of their business processes (Obenreder 2004). In addition to

the aspect of employee satisfaction, the issue has become such an economic factor that

many insurance companies require organizations to have workplace surveys and audits

done on an annual basis. For example, Maine Savings, a financial services firm in

10


Hampden, Maine with 150 employees, is required to have a third party workplace audit

review annually as part of the yearly renewal process for their disability insurance policy.

As part of this audit, employees are surveyed and interviewed, and an inspection of the

physical work environment is conducted.

The major focus of designing an appealing physical workplace for employees is that it is

the basis for all other elements that play into employee satisfaction. Because appealing

and comfortable workspaces improve employee attitudes and overall employee

satisfaction, both employees and employers can benefit from a well-designed work area

(Herz 2005). Therefore, when employees are satisfied with their physical work

environments, they will be more productive, tend to be more loyal, and be more satisfied

with their work situation. The research indicates that developing physical environments

where employees can feel comfortable, accessible to both management and coworkers,

and have input into their work environment, are more satisfied with their jobs. An issue

that must be highlighted while discussing physical work environments is the issue of

collaboration with coworkers. Although collaboration is defined as ‘working together’,

effective collaboration entails both individual focused tasks and interactive group work.

Organizations that wish to foster an atmosphere of collaboration and teamwork should

ensure that the appropriate space, furnishings, and technologies exist in order to properly

facilitate these activities (Heerwagen 2004).

In addition to the physical aspects of one’s work environment, there are other important

factors such as flexibility, a hostile free work environment, and telecommuting that have

11


an effect on employee satisfaction. This next section will focus on flexible work

environments, and the resultant benefits and effects on employee satisfaction. Like the

other characteristics of the effective workplace, the flexible workplace calls for new ways

of managing and working. Flexibility is often associated with the ability to easily move

from one situation to another. Flexibility in the workplace however, is a strategy that is

being used to increase productivity by leveraging employee schedules and technology.

Managers and employees that are involved in flextime strategies must be able to work

more autonomously, but yet assume more responsibility (Bond, Galinsky and Hill 2002).

One of the more popular strategies today is the implementation of a flextime system,

which engenders both employee accolade, as well as incentives from particular state

governments. For example, flextime schedules are promoted by the state government in

California as a way to reduce peak time traffic problems.

Traditional flextime arrangements allow the employee to select their starting and ending

work times, within a range of acceptable and established core hours. For example, if the

core hours at an organization are established as 10 a.m. to 2 p.m., an employee may

choose to work 5 a.m. to 2 p.m. or 10 a.m. to 7 p.m. As long as the employee is present

during the established “core” hours, they are free to make their own schedule. Some

employees may have to work the same hours once they are established, but more and

more employees are being allowed to change their hours on a daily basis, as necessary.

Statistics show that 43 percent of U.S. employees now have access to traditional flextime,

up from 29 percent in 1992 (Bond). In terms of gender differentiation, women are more

likely to use flextime benefits; however, the majority of men (68%) and the majority of

12


non-parents (70%) use flextime when they have it. These statistics indicate the extent to

which flextime adds to employee fulfillment and satisfaction (Appendix 3).

Two other flextime strategies that should be mentioned here are compressed workweeks,

and reduced time work programs. A compressed workweek strategy allows employees

the opportunity to work their allotted weekly hours over fewer days. For instance, an

employee could work 10 hours per day over 4 days rather than 8 hours per day over 5

days. A reduced time strategy allows certain employees the opportunity to work a part-

time, flexible schedule throughout the week, as needed. This strategy is especially

important for America’s aging “baby-boomer” workforce. With the impending worker

shortages that are forecast to take place in the next five years, strategies that can be used

to retain an older, more versatile workforce will be needed (Bond). The issue of

impending worker shortages, retention, and overall employee satisfaction make flextime

strategies an important employment consideration.

An analysis of employee satisfaction in the workplace would be incomplete without a

discussion about the effects of hostile work environments. Hostile work environments are

like a cancer that can eat through the core of productivity and employee satisfaction faster

and more devastating than any other work associated instance. Employers seek to prevent

events that may lead to a hostile work environment, as they can be extremely disruptive

to the work force. In addition to the potentially devastating financial ramifications of the

existence of a hostile work environment, there is the potentially lasting impact on

employee morale and satisfaction. There are many circumstances that may constitute

13


what is considered to be a hostile work environment. For the most part, they are

predefined by law or organizational policy, but may have to be examined on a case-by-

case basis (Parham 2003). Management must strive to always be aware of toxic

relationships, tense behavior between employees, and negative overtones in the work

environment. By creating positive environments that nurture success, employers are

exhibiting to their employees a commitment to achieving an atmosphere that will

engender employee satisfaction in the workplace.

Employee Training/Programs

A common mistake made by many organizations is the failure to adequately invest in the

continued training of their employees after they are hired. One of the biggest factors in

employee satisfaction/loyalty levels is the amount of training and development

companies provide. The research on this topic is clear that employees want to grow, be

given the opportunity to identify a desired career, and be given an opportunity to pursue a

chosen career path by the organization (Sussman 2006). As a result, the training and

development of employees is an essential part of their satisfaction and longevity and

should be made a priority of the organization. Continued training and programs not only

help to bolster employee satisfaction, but also produce tangent benefits for the

organization. Training initiatives should be well planned, funded, and designed to meet

organizational goals. This section will consider the effects of well- designed,

comprehensive training programs. Included in this analysis will be the effects of training

on employees, benefits of employee training to the organization, types of training

14


programs, and the required commitment needed for a successful training and

development program.

What is the definition of an effective training program? The answer is different

depending on the type, size and focus of the particular business. Some organizations still

utilize outside training consultants that are sporadically used to deliver slide presentations

at a discount rate. The effectiveness of these training sessions is questionable, but

employees are generally only temporarily enlightened about a training topic (Laff 2006).

An issue that exacerbates the lack of pertinent training is the scarcity of funds committed

to training endeavors. Organizations must realize that the quality of their employees is

directly related to the level of training and development they receive. In order to

accomplish this, training should be an integral part of the strategic plan, and be

adequately funded in order to achieve the desired result. Employees, in most cases, are

the largest investment a company will ever make. A commitment to investing in their

training and development is a prudent strategic move that will not only enhance

productivity, but also increase employee satisfaction.

There are many specific reasons for a company to focus on the training and development

of its employees. Among these reasons are: creating qualified replacements for departing

employees, enhancing the organizations ability to adopt new technologies/processes,

developing informed/knowledgeable teams, and the ability to ensure trained and

experienced employees for potential growth and expansion. There are also many different

types of training programs and methods, but all of them should address the following

15


considerations: what are the organizational objectives (strategic plan)? What are the

specific training needs? What are the training objectives? Who are the candidates to be

trained? What are the methods and modes of training? How to evaluate the candidates,

conduct the training, and evaluate the training process. Some organizations rely on

outsourcing these requirements, while other, typically larger organizations, create their

own in house training programs; in some cases branding them as “corporate universities.”

Companies have access to various outside training resources such as webinars, canned

training products, and outside training consultants. Although these resources may prove

to provide many different options and viewpoints, they lack the specificity that a well-

designed in-house training program would have (Carolina 2004). In-house,

comprehensive-training programs can be very effective but require commitment and

funding.

The first step an organization must take toward administering a worthwhile training

program is to assess the organizational objectives for the training to be done. In many

cases, the majority of ongoing training may be associated with reinforcing the

organization’s strategic goals and vision. The primary goal of many employee

training/development programs is to communicate the vision of the organization, help

workers understand the corporate values and culture, and show employees at every level

how they can help the company succeed. Many of these types of training programs help

employees become indoctrinated to the organization’s corporate culture, which helps

them better understand and support the strategic initiatives of the company. Although

specific technical training is necessary and generally the focus of a corporate training

16


program, being able to instill and reinforce corporate culture and a strategic vision to

employees can prove to be invaluable (Shelton 2001). Whatever the objective of the

training, it should be documented and agreed to by the leadership of the organization.

After assessing the organizational objectives in relation to training, the next step is to

establish the training objectives of the organization. There are several different ways to

go about establishing the training objectives of an organization, but the method should

take into consideration the three major human resource areas: the organization as a

whole, the job characteristics, and the needs of the individual. In order to begin this

process, a comprehensive assessment of what tasks are needed to be accomplished in the

organization, by whom, and what are the necessary skills for the tasks. This process

should result in an established foundation for which future training and benchmarking

can be done. There should be short term, medium range and long term training goals

established as part of the strategic plan. Training plans and objectives should then be

tailored to specific jobs that are then filled with the most qualified candidates possessing

the requisite traits that are best suited for a particular position.

Selecting the appropriate employees for training is a crucial step in the organizations

training process. Because of the time and financial commitments necessary for an

effective training program, being able to efficiently target the required training for the

appropriate individuals will allow the organization to work more effectively and

efficiently. Training programs should be designed to consider the ability of the employee

to learn the material and to use it effectively, and to make the most efficient use of

17


resources possible. Training can be a valuable source of motivation for an organization’s

employees, if administered correctly. In order to ensure the maximum effectiveness of

any training program, the candidates for training must be chosen correctly and the

training must be pertinent and add value for their particular employment situation

(Carolina 2004).

One of the most important elements of the training process, that includes a myriad of

options, is the method of training. Especially in today’s high-tech, automated world,

many different training methods exist as alternatives to companies. Some of the more

popular methods include: on-the-job training (OTJ), lectures, video study, seminars,

webinars, distance education, and a variety of others. With the constant upgrades and

improvements in technology, previously unheard of methods of training are beginning to

dominate the corporate training realm. For example, one of the hottest new trends in

corporate training is the use of the MP3 player as a training delivery device.

Organizations are now able to take advantage of the efficient and cost effective use of

technology as a training tool. Specifically, the use of MP3 devices that can store large

amounts of data and are convenient to use as training tools is exploding. According to a

recent report from eMarketer, an Internet research group based in New York, the number

of podcast users grew to 11.4 million last year, up from 800,000 in 2004, and could reach

about 55 million by 2010 (Agnvall 2006). As long as the method is effective and

accomplishes the intended training outcome, it should be considered.

18


The next consideration is to plan the training administration. Training administration is

the coordination of programs, facilities, employees, equipment, supplies, and time frame

for the training to be conducted. For the training process to be effective, employees must

be satisfied with their training experience. This process entails ensuring that employees

have all of the time, supplies and comfort necessary to understand and properly digest the

information that they are presented with. Employee satisfaction is not only a derivative of

the information received, but also the training process as a whole. A well-managed

training administration program can ensure that all of the elements necessary for an

effective training program are present and functioning as planned.

One of the final steps, but also one of the most important ones necessary for an effective

training program, is the ability to accurately assess and evaluate the training conducted.

Training evaluation should not be considered a one time, or static event during the

training process. It should be constant and dynamic in nature, with established goals and

outcomes. As was previously noted, benchmarks should be established at the outset of the

training process, with target milestones as goals. Both employees and the training process

should be evaluated comprehensively in order to accurately determine the effectiveness

of the training conducted and that the employee received the desired information. Any

deviations from the desired results should be noted and corrected in a timely fashion.

Timely evaluation is critical in any training program, as it prevents a prolonged deviation

from organizational goals.

19


Research in the area of corporate training has established that companies with strong

training programs have less employee turnover, more productive employees, and

consequently, are more profitable. It is reported that in 2004 U.S. based corporations

invested more than $50 billion in training initiatives. As with any other large business

investment, there should be a rational expectation of a positive return on investment

dollars for this training. In order to realize a positive return on training investments,

organizations should ensure that the training being given is properly aligned with

organizational goals and strategic initiatives (Clark and Kwinn 2005). As this section has

highlighted, the training function is an important and essential part of employee

development, and subsequent employee satisfaction.

Employee Development & Leadership Planning

Closely related to the topic of training, but different enough to deserve its own analysis,

is the subject of employee development. Employee development typically encompasses

two main areas: personal development and professional development, and is more long

range than traditional training. Training typically refers to providing the skill necessary

to effectively do one’s current job, or deal with one’s current situation. Career

development encompasses a broader set of training topics that have to do with one’s

overall professional development and career planning. Professional development skills,

although typically outside the scope of an employer’s job description, provide the skills

and abilities necessary for the growth and maturation necessary for leadership positions

(Chapter 11 2006). This section of the paper will focus on the importance and relevance

of employee development as it relates to employee satisfaction.

20


Recent research has shown that the number one key to employee satisfaction is not pay,

as most would suspect. Pay is not the leading consideration, according to an ongoing

survey by Career Systems International. Even the much-vaunted notions of recognition

and respect fall lower on the list of Top 20 Retention Drivers. Almost half – 48.4 percent

– of the 7,600 plus respondents in the seventh edition of the survey, claim that “exciting

work and challenge” top the list of reasons for staying at a job. Second on the list of Top

20 Retention Drivers, at 42.6 percent, is “career growth, learning, and development”

(Kirkpatrick 2005). For this reason, it is incumbent on organizations to satisfy this

inherent need and maintain employee satisfaction. Organizations that invest in the

development of their employees more than recover the costs over time. By retaining

employees, the value of their development increases. They will increase productivity and

contribute to the overall success of the organization. Their expanded knowledge makes

them valuable assets for the company. As more than a quarter of the working U.S.

population reaches retirement age in the next three years, employee development plans

will be a vital part of the knowledge transfer process for both companies and employees

alike.

One of the key functions of a good employee development program is to select, cultivate,

and train future leaders and managers. Employees throughout the organization will be

motivated to move up in the organization if they know that they have a chance to be

considered for leadership development. Developing the skills of this carefully chosen

staff is essential to achieving the organization’s business strategy and achieving a high

21


level of worker satisfaction. Continual education for employees is one of the most vital

organizational strategic goals. When organizations hire the best candidates and develop

them properly, both the organization and the employees benefit. When organizations are

able to retain quality employees with sharp skills, the economic prospects for the

organization improve considerably (Cascio 1998). Employees throughout an organization

should be examined and considered for future leadership positions within the

organization. In many cases, companies only confine their search for future leadership to

administrative or management employees (Sussman 2005). If employees throughout the

organization believe that through hard work, motivation, and accomplishment they can

achieve leadership positions, they will be more likely to exhibit these traits. The

management and leadership development process is flexible and continuous, linking an

individual’s development to the goals of the job and the organization. In order to provide

opportunities for employees to attain a broad based set of management skills; many

organizations establish management development programs. The ultimate goal of these

management development programs should be to provide the basis of knowledge

necessary to develop the organization’s employees into its future leaders (Chapter 11

2006).

Developing future leaders should be a main focus for any organization that considers

itself a going concern. Developing leaders that will help to facilitate employee

satisfaction is a key factor in maintaining an engaged, motivated workforce. The

traditional view of leadership suggests that for the most part, people are powerless and

lack discipline and vision, traits that can only be overcome for them by a few strong

22


leaders (Senge 1990). Organizations that focus on collaborative style leadership and

developing like talent for the future will stand a better chance of garnering the support of

the workforce. Traditional leadership development that promotes overly political self-

interests, the goal to achieve personal agendas, and manipulation of information, in the

end, has a devastating impact on employee morale. Certain political behaviors waste a

team’s time and energy, divert the focus to the wrong things, and lead to decisions based

on inaccurate information. Good employee training models include training for

collaborative management, in addition to career management and skill enhancement

training (Seldman and Thomas-Williams 2005).

An important element of employee satisfaction is the acknowledgement and support of an

organization for the development of their workforce. Every employee in an organization

possesses natural or innate abilities that if developed and nurtured could lead to improved

work performance and a greater level of job satisfaction. Most people understand their

abilities and what they do well (with greater ease), and also what they tend to have

difficulty with. Knowing and understanding this allows employees to have the ability to

decide what work is best suited for their skills and abilities in order to derive the most

possible satisfaction from it (Tavantzis and Emanuel 2006). Organizations that promote

this kind of open and honest self-discovery then, allow employees to take advantage of

related development opportunities, and find higher levels of satisfaction among their

workers. Other important leadership skills such as resiliency must also be allowed to

develop. Organizations should allow employees the opportunity to occupy positions that

require dynamic thought and are fraught with change, and make decisions that will lead

23


to a more resilient leader. Many employees that are not given the opportunity to gradually

work in stressful situations end up blaming management and others for their feelings of

distress. Instead of learning to deal with stress and build resiliency skills, they instead feel

victimized and become counterproductive. Organizations can overcome this possibility

by supporting and organizing resiliency strength development for their employees

(Siebert 2006).

Employee development is not only good for the employee, but also the organization. One

commonly overlooked aspect of employee development that also encourages employee

participation, is the practice of knowledge sharing. Transferring knowledge between

employees not only promotes collaboration in the workplace, but also serves to leverage

the expertise of a few individuals to a larger potential pool of workers. This practice has

served to be an effective mode to transfer much needed knowledge, but also as a

collaborative satisfaction tool as well. Organizations that concentrate on a proactive

approach to retaining knowledge can help to assure a higher level of organizational

satisfaction (Salopek 2005). An organization that takes the steps necessary to provide

stimulating and relevant development to their employees will experience employees with:

upgraded skills, working to their full potential and equipped to deal with the changing

demands of the workplace; employees with higher morale, career satisfaction, creativity,

motivation; increased productivity and responsiveness in meeting organizational goals.

24


Employee Satisfaction and Recognition

Employees were once thought to be just a normal part of the production process of

creating goods and services. Today however, most organizations realize that employees

are much more than just “input” as part of the business generation process, and require

motivation and subsequent recognition in order to build and maintain employee

satisfaction. This section will consider the different methods associated with motivating

and recognizing employees, in order to achieve maximum employee satisfaction. Much

of the basis for employee motivation can be traced to the Hawthorne Studies, conducted

by Elton Mayo from 1924 to 1932. The major conclusion of this study was that

employees are not solely motivated by money and employer behavior and attitude have a

great deal to do with an employee’s satisfaction. After this initial research, understanding

employee motivation was the focus of many other researchers, the most notably being

Maslow, who developed the need-hierarchy theory. According to A.H. Maslow, people’s

needs resemble a pyramid. As basic needs are satisfied, higher levels of needs emerge

and motivate the employee’s behavior. Because of this, organizations need to provide a

work environment that will motivate employees above and beyond their physiological

and safety needs (Gray 2006). The analysis in regard to this topic will be done using the

analysis and research presented in Maslow’s hierarchy of needs theory (Fig. 1).

Figure 1: Maslow’s Hierarchy of Needs

Source: John Gray Awards

25


Motivation has been defined somewhat differently by many different researchers, but is

generally accepted as: the psychological process that gives behavior purpose and

direction; a predisposition to behave in a purposive manner to achieve specific, unmet

needs; an internal drive to satisfy an unsatisfied need; and the will to achieve (Lindner

1998). For this paper, motivation is operationally defined as the inner force that drives

individuals to accomplish personal and organizational goals. Having established a

working definition for “motivation”, the next step is to assess the role of motivation in

organizations. The obvious question that must be asked before assessing the role of

motivations in organizations is, “why is it necessary or important to motivate

employees?” The answer is one of economics. Motivated employees are more productive,

more engaged, and are satisfied workers. Employees that are motivated have a sense of

purpose and belonging, and therefore tend to exhibit greater loyalty to their respective

organizations.

A good example of an organization proactively assessing the factors that motivate their

employees can be found at the Piketon Research and Extension Center in Piketon, Ohio.

The Company developed a survey questionnaire consisting of ten factors and asked

employees to rank them in order of importance. A comparison of these results to

Maslow’s need-hierarchy theory provides some interesting insight into employee

motivation. The number one ranked motivator, interesting work, is a self-actualizing

factor. The number two-ranked motivator, good wages, is a physiological factor. The

number three-ranked motivator, full appreciation of work done, is an esteem factor. The

number four-ranked motivator, job security, is a safety factor. Therefore, according to

26


Maslow (1943), if managers wish to address the most important motivational factor of the

Center employees, interesting work, physiological safety, social, and esteem factors must

first be satisfied. As is the case in this example, an employee survey can help

management effectively identify the factors that they should consider in order to better

motivate their employees.

An integral part of employee motivation is making it constant and perpetual and one of

the best ways to accomplish this is with a formal employee recognition program.

Recognizing and applauding employees’ achievements and contributions are critical to

reinforcing desired behaviors. The best way to encourage desired behavior and create

enthusiasm for continued future improvement is to formally recognize employees.

Recognition programs have proven to play an important role in a company’s employee

satisfaction and growth. Recognition programs serve to create positive environments that

encourage desired behaviors. Organizations that implement meaningful and effective

recognition programs often gain a competitive edge through increased employee retention

and an increase in overall employee satisfaction (Recognition 2006). This section will

highlight the benefits of formal recognition programs and site examples of successes with

recognition programs.

The implementation of effective award and recognition programs can create a positive

working environment that encourages employees to thrive. Recognition makes employees

feel valued and appreciated, it contributes to higher employee morale, and increases

organizational productivity. In addition, strong recognition programs are effective

27


employee motivation tools. They work to reinforce organizational goals, mission, and

vision (Brintnall 2005). The research in this area has consistently shown a strong

correlation between employee satisfaction and strong recognition programs. In a recent

Gallup poll survey of 80,000 employees, recognition ranked fourth among the 12

dimensions that consistently correlated with those workgroups that have higher employee

retention (Gallup 2006). These results only serve to reinforce the hypothesis that

recognition programs serve to motivate employees and bolster employee satisfaction.

Another issue the research has helped to clarify is that the recognition need not be in the

form of monetary payment. Employees have indicated that certain forms of recognition

such as: formal and informal acknowledgement, increased responsibility, better title, or a

special parking space, achieve the same desired result as a cash award. The key to

recognition programs being successful is to formalize them and make them a priority, like

any other corporate goal.

An effective recognition program must be aligned with organizational strategies and

goals. This will ensure that employee’s efforts are channeled toward the ultimate goals of

the organization. A well thought out and designed recognition program will take into

consideration factors such as: the goals of the program, the audience, the budget,

guidelines, communication, and methods of award. The following is an appropriate

example of the 12 steps of the recognition program at the Sony Corporation:

Step 1: Awareness. What will the recognition program be used for? Will it be

used for promoting safety, improving performance, driving quality, or building

morale? Define the goal for the program and promote the goal through standard

lines of communication in the company. Other communication methods may also

28


assist in communicating the program – use posters, contests, group meetings,

department luncheons, fliers in employee paycheck envelopes.

Step 2: Define the audience. Determine what the behaviors are that need to be

changed or improved upon. Then determine whom the program will be targeted

for. Is it for all company employees, or one specific department? Identify the

people who will most benefit from the program and make a commitment to

promote the program in that group.

Step 3: Identify how your program will be set up. There is no cast-in-stone

formula to follow. Try different approaches and see what works best. Determine

if you will recognize individual performance or team performance. Will it be

peer recognition, or data and measurement related? Who will make the

determinations of who receives the award(s)? Will there be a deadline or time

frame for submission of candidates? Will the program take the form of a

suggestion program, or will it be performance based? Will there be a theme for

the program? The company must determine the criteria for the incentive or

recognition before the implementation, and then track the data. If the data does

not reflect what is needed, then either establish a new goal, or track a different

data point – but either way make sure you communicate that the parameters of

the program are changing!

Step4: Build a budget. There is no set cost for recognition programs. Items may

be as inexpensive as a $5.00 gift certificate to a $50,000 car. The budget should

be based on what the company can afford to put forth. But, if nothing is put forth,

remember that a “thank you” only goes so far to improve morale or motivate

employees.

Step 5: Seek help if you need it. Look to industry groups, human resource firms,

or even your competitors to see what they are doing with their programs.

29


Step 6: Select the awards to be given. You value your employees. Why not

extend that value to award items that match what your employees’ value. Movies,

lunches, grocery certificates, electronics, quality clothing items, or cash are

examples of items that could be valued by employees. Take a survey and see

what people would like. Suggest price ranges (items under $20, items under $50,

and items under $100.) You may be surprised what employees come up with, but

be sure the awards are something they want. The biggest pitfall in recognition

programs is offering an item that is not valued by the person receiving it.

Step 7: Establish the rules for the program. Common criteria for the program

usually include: the duration or time frame of the program, the qualifications to

be considered for an award, the requirements to be met, the selection process, and

how the awards will be delivered. The rules should be clearly written, avoiding

buzzwords and jargon. Keep it simple and understandable. Make sure the rules

are fair and equitable to all parties involved.

Step 8: Communicate the program to employees and staff. Once the essentials are

in place, it’s time to get the employees involved and motivated! Develop a solid

communications plan for the program that determines what will happen (and

how) from beginning to end. Be as creative as you like, or delegate someone in

your company to oversee the program. What promotional materials will be used

and who will create them? How long will the initial promotional launch take?

Don’t oversell or inundate the employees with too much information, but use the

tools available (e-mail, voice mail, meetings, intranet systems, etc.) At the mid-

point of the program, use a company newsletter or e-mail, or some other tool to

communicate the changes that occurred because of the implementation of the

program.

30


Step 9: Track the changes in performance. Did the program have the desired

impact? Did employee attitudes or behaviors change in the desired way? Ask for

employee feedback on the programs success. Develop quantifiable methods to

determine if the program was a business success.

Step 10: Announce the winners. Congratulate the top performers but be sure to

show appreciation to the whole team for their efforts. Meetings provide the

perfect opportunity to recognize workers for a job well done. Public recognition

reinforces their achievements and serves as a reminder to others to do an even

better job next time. Send congratulatory letters to the employees at home (a nice

surprise) or at work. Not only can they share the kudos with their friends and

family, but they have a tangible token to remind them of their success. E-mail

announcements give instant gratification. Wired workers like to receive

immediate recognition and this option is cost-efficient and easy to implement.

But, be sure to ask employee permission to use their names, as some people do

not like to be recognized publicly.

Step 11: Deliver the awards. Pay attention to the details of the presentation. First,

a letter of congratulations is always required. Deliver any tangible awards on the

date promised. If a “ceremony” is to take place, be sure to get the buy in of the

participants, and determine if they would just like their name mentioned, or if

they would be willing to be called to the front to receive their award. Make sure

their immediate supervisor and top company officer(s) are on hand for the

ceremony. If the delivery is to be less elaborate, the supervisor and company

officer(s) should still be there to present the award and their congratulations and

thanks for a job well done.

Step 12: Maintain the momentum. Just because the program is over, doesn’t mean

it can’t still contribute to the business success. Will you run another program?

31


Will the principles and lessons learned from this program be transferable to

another program? Evaluate what worked (and what didn’t) in this program and

apply it to the next one. Determine if this program helped enhance employer-

employee communication, and ask employees for ideas and suggestions on what

to do next time, or differently (Recognition).

Although organizations may have different designs and plans for a recognition program,

this example from the Sony Corporation includes the essential elements necessary to

effectively effectuate positive employee behavior.

The important point to keep in mind regarding recognition programs is that they come in

all shapes and sizes and do not have to be expensive to initiate. The most important

factors are that they must be fair, consistent, and valued by the employees. As this paper

has previously noted, effective recognition does not have to be in the form of monetary

remuneration, but must be tangible and appreciated by employees. Most employee

surveys indicate that their organization lacks an effective recognition program, and also

that recognition programs are valuable at increasing employee satisfaction. Organizations

that are able to implement effective recognition programs often benefit from higher

employee morale, increased productivity, and a general increase in overall employee

satisfaction (Roche 2006).

Organizational Goals and Employee Expectations

Organizations are entities that have a life of their own. They are like a big machine with

many moving parts, diagrams, and purposes. Organizations are typically involved with

elaborate data collection, in-depth analysis, and making decisions based on the results of

that data collection (Wheatley 1994). Essential elements of an organization are the

32


employees that control the environment. In order to be successful in the organizational

environment, employees must understand the goals, structure, and procedures that

management has laid out as the basis for organizational operations. In today’s

competitive and rapidly changing business environment, establishing and achieving goals

and objectives are common denominators of successful businesses. Goals are essential

tools that help employees and organizations alike, focus on the desired results of the

business strategy. Employees that are involved with goal setting tend to stay longer and

be more productive employees (Jewell 2006). The impetus is on management to set

attainable goals in accordance with the strategy of the organization, and then effectively

communicate these goals to employees. The focus of this section is to understand the

value and benefit of defining organizational goals, assessing employee expectations in

relation to those goals, and the effect of this discipline on employee satisfaction.

Figure 2: Organization Strategy Figure 3: Organization Environment

Source: Ithaca State University

“If you don’t know where you are going, any road will get you there.” This line from

Alice in Wonderland has been true in many organizations and companies. They often

don’t have-or maybe don’t articulate very well real business goals (Davis 2006). If the

leadership has no plan, or does not effectively articulate a plan to the employees, how are

employees expected to know and understand what goal they are working toward? For this

33


reason, it is necessary for management to set the goals, define the goals, develop a plan of

action to achieve the goals, communicate the goals to employees, and to follow up on

expectations (Fig. 2 & Fig. 3). Many issues that face management on a daily basis could

be diminished or eliminated by effectively communicating expectations to employees

(Findley and Amsler 2006). While the principles of setting expectations are well

understood, it is worth review. Without defining the organization’s goals, employees will

lack the focus to stay productive and will soon become distracted and misguided.

Figure 4: Performance Management

Source: U.S. Office of Personnel Management

Employees today expect not only to fully understand the mission and goals of their

organizations, but to also be involved in many cases with creating the mission and setting

the goals. Goal setting is one of the most prominent and basic tools used by both

individuals and organizations to assist in guiding their direction and in accomplishing it

(Fig. 4). There are several important goal related terms that will be addressed here such

34


as: mission, objectives, strategy, and action plans. Allowing employees to be involved in

the goal setting process, whether by participating in the actual concept, or just

participative delivery, creates an atmosphere of collaboration and helps to enhance

employee satisfaction. Many researchers define a “collaborative work environment” as a

group in which people work effectively together to achieve business results and sustain a

positive work environment that includes work/life balance. Organizations wishing to

promote collaborative work among their employees create structures and practices that

encourage the desired results (Gewirtz 2005). Teamwork will be addressed in greater

detail later in this paper. The important point is to recognize the strong correlation

between employee involvement in organizational goal setting and positive organizational

results, including increased employee satisfaction.

Those that are involved in the organization and are affected by organizational outcomes

are called “stakeholders.” In almost every organization, employees are the largest group

of stakeholders. As is the case with any organization, the different stakeholders have

different motivations and different ideas of what is important to them and the

organization. Employee owned change and involvement in the process is practical and

functions as a discipline to focus energy on specific tangible goals. While most

organizations begin purposefully, economic shifts, changes in the marketplace, and

alterations in leadership values and styles impact organization effectiveness. The wants

and needs of the individual are essential input to the overall goal-setting process of the

group. If each group member is provided the opportunity to contribute to the goals of the

group, then the individual energies of the group members will be transformed into

35


achieving the common goal as a team (Carter-Scott 2006). The following section will

delineate several of the goal setting processes that employees should be involved with in

order to garner greater employee support and satisfaction.

The mission statement is a crucial element in the strategic planning of a business

organization. Creating mission statements is one of the first actions an organization

should take, but may be adjusted over time as the need arises. The mission statement

should be the foundation for the development and implementation of the organization’s

business strategies (Cardani 2000). Because the mission statement is considered the

foundation for the rest of the organization’s goal setting processes, allowing employee

input and involvement helps to engender a feeling of loyalty and trust among employees.

The next elements of goal setting that would benefit from employee involvement are

objectives and strategy. The objectives of an organization typically arise out of the

mission statement. The objective should be “what” the company will do to achieve its

goals. For example, “we will grow our customer base through superior service.” Goals

would then naturally flow from attempting to meet this objective. Once an organization

has determined its overall objectives, it must then develop a strategy, a general course for

meeting the objectives, taking into account the current situation and available resources.

Developing an overall strategy is quite often accomplished before goal setting begins

(Davis 2006). Employees all come to an organization with their own mission, objectives,

strategies, and goals. Allowing them to actively participate in the goal setting process for

the company that they work for creates a lasting loyalty and instills a sense of process

36


ownership. These feelings translate into satisfied, productive employees that are not only

willing, but also wanting to positively contribute to the success of the organization.

Communicating with Employees

The art of communication is a vital component of employee satisfaction and engagement.

Without workplace communication, nothing would be accomplished. Instructions could

not be given; equipment and supplies could not be ordered; progress could not be

measured; and services could not be delivered to customers. The five functions of

management: planning, organizing, staffing, leading, and controlling, are all dependent

on communication. Surveys conducted with highly successful managers consistently

highlight the benefits of effective communication (Slagle 2006). There are many different

methods of communicating in the workplace that include: face-to-face meetings, staff

meetings, small group meetings, department meetings, management forum meetings,

walkabouts, telephone conversations, mission statements, newsletters, bulletin boards, e-

mail, and intranets, just to name a few. All other components of this analysis would be

impossible to implement without communication. For that reason, this section will be

concerned with employee communication in the workplace, and the many considerations

involved with effectively communicating at work.

Employees communicate with each other and management in many different ways, as

well as being communicated to by management in many different ways. Employee

communication is a very powerful factor in the level of employee satisfaction that

workers in an organization have. From the perspective of the employee, communication

37


from management is a reaffirmation of what the leadership believes and stands for. For

this reason, the effectiveness and efficiency of communication in an organization is often

used as a barometer to gauge the performance and overall effectiveness of an

organization. In an article titled, Interpersonal Style and Corporate Climate:

Communication Revisited, Jay Hall (1980) states in regard to the importance of

communication:

“High on the diagnostic checklist of corporate health is

communication. The ease with which information flows

downward, upward, and horizontally is often a major internal

indicant of organizational effectiveness; who listens to whom

may reveal the real as opposed to the apparent authority structure

in a firm; and the proportion of people who consistently fail to

get the message is frequently taken as a statistical baseline for

predicting the efficiency with which plans will be translated into

actions (p.216).”

This statement highlights the importance of effective communication in the workplace,

and the potential negative ramifications of errant or misguided communication.

Communication is traditionally thought to have three main elements: a message, a sender,

and a receiver. However, this is a stark over simplification of the process involved in

workplace communications. Each of these stated elements has attached to it, several

factors that must be considered in the process of communicating. The first to be analyzed

here is the element of the message. Some of the more important considerations in regard

to the message are: clarity, purpose, audience, meaning, complexity, and pertinence.

Vague words or phrases may lead to ineffective results or no reaction at all from the

intended recipient. Different words have different meanings to different people,

38


depending on their age, economic status, position within the company, or cultural

background.

Simplicity and understandability are important factors to remember when attempting to

communicate in the work environment. The more words and punctuation there is in a

sentence, the more likely it is to be confusing to an employee. Precision and clarity are

keys to delivering the intended message and invoking the intended outcome.

The second element of communication is the sender, or source of the message. The

sender must be known to, or have relevance to the recipient in order for the message to

carry any importance in most cases. This element is closely related to the amount of

communication an employee is subject to in the workplace. In many organizations, mass

communications or cross-departmental communications are done everyday that do not

have particular relevance to everyone they are communicated to. This issue creates two

problems; first, it increases the amount of information an employee is subject to and

second, the information may not be pertinent to all those that read it. This situation has

the effect of employees, over time, becoming immune to certain communications. It may

also result in information overload, which may have an adverse effect on future employee

communication. Employees generally prefer to hear from their direct supervisor, but in

some cases, mass communication may be appropriate. As long as the sender of the

information is legitimate, known, and relevant, employees will be more willing to

internalize the message being sent.

39


The third element of communication is the receiver, which is closely related to the

element of the sender in the regard that the receiver must be relevant and known. A

relative message that is sent by a relevant sender, but is sent to an irrelevant recipient, has

no effect and is wasted communication. If the receiver of the communication is relevant

and is the intended audience, the message must be understandable to the employee. This

concept goes back to the element of the message itself. If it contains information that is

valuable and pertinent to the receiver, it will be received much better. Two important

factors involved in the communication process that involve the receiver, and are used to

ensure a successful communications loop, are follow-up and feedback. The sender should

follow-up with the receiver to see whether or not the receiver has interpreted the meaning

of the message as it was intended. To help facilitate this process, the receiver, in turn,

should provide adequate feedback to the sender of the information that gives an

indication that they received the information and understand its intended meaning. This

process helps to close the continuous communications loop and ensure that the

communication process was successful and effective.

This next section will consider communications in the traditional work environment,

expectations of employees, and management’s responsibility in regard to effective

communication to employees. Many supervisors and managers already know and

understand how important it is to be effective communicator’s with employees.

Communications in the workplace is not just about communicating directives; it is also

concerned with building relationships, instilling trust, promoting mutual understanding,

and providing a tool for employee involvement. Like many facets of an employee’s job,

40


communication can be taught, and effective organizations ensure that it is. In most cases,

the communication style of an organization conveys the values and culture of that

organization. Communication is not only an important part of each internal department, it

is affected and shaped by the culture of a workplace and therefore demonstrates and

transmits the characteristics of a workplace culture. Communication patterns within an

organization typically follow the hierarchal model that exists, such as a command and

control management style. If an organization’s management exhibits an open,

participative environment that is receptive to employee involvement, so too will be the

communication style of the overall organization (Communication 2006).

Just like the planned direction of a company, so too should organizational

communications have a strategy that is conveyed and understood by all members of the

organization. Many organizations fail to recognize the importance of highlighting internal

communications, but rather choose to assume that employees should automatically march

in lock step with organizational priorities, strategies and initiatives. The research on the

subject indicates that companies that focus on improving the effectiveness of their

internal communications experience increased productivity, employee satisfaction, and

market value. Communication in progressive organizations reflects a view of the

relationship with its workers. Management provides information to support participation

of the workforce in decision-making. Collaborative employee-management

communication is designed for the management and employees of an organization to

mutually understand the strategies, goals, and initiatives that exist. It also allows all of the

41


parties involved in these goals and initiatives to understand their roles, as well as

expectations, in relation to meeting the objectives to be attained (Wilkins 1989).

A major communications issue that many organizations face is the issue of trust. There is

a predominate school of thought that feels employees should only hear good news, or

information that has been slanted to sound good. This kind of perspective can lead to a

mistrust in management by employees and lead to degrading communications in the

workplace. Effective employee communication should be honest and should address

issues in a substantive manner. The goal of communication should be to facilitate the

bilateral flow of information that should improve the employees’ commitment to the

organization’s goals and objectives. Leadership must also be open to feedback.

Employees need to believe they have a voice in the company and that their input matters.

The management of an organization must do more than talk about bilateral

communication; they must prove that it exists within the organization (Varelas 2005). If

employees see that the management of an organization is committed to a communications

process that is based on respect, dignity, trust, and shared ideas, they will participate in

the communications process openly and honestly.

This paper previously mentioned that an organization should have a strategy for internal

communications, and that strategy should be shared with all employees. Organizations

should delineate the communications expectations to employees and establish clear

guidelines for communicating in the workplace. The communications strategy should be

developed in order to encourage open two-way communication and also facilitate the

42


exchange of information necessary to conduct business. Having a strategy in place and

everyone in the organization understanding it, is good management and helps to promote

effective relationships within the organization. Some of the early research on this topic by

Blake and Mouton (1968) revealed that where management is effective and relationships

are sound, there are fewer problems with communication (Blake and Mouton 1968). The

starting point for developing internal organizational communication processes that build

trust and credibility is to establish a set of working principles as the foundation. Here are

some examples of such principles that could guide communication in an organization

trying to operate on the basis of trust and credibility:

It is essential that all employees understand the business

Communicating the rationale for, and details of, strategies, decisions, and actions

is vital

Immediate, general dissemination of critical information is needed

Communicate on a Right-to-Know rather than a Need-to-Know basis

The more important the information, the more people we tell

Negative information is used to improve the organization, not to punish people

Always say what you actually did and do what you say you will do

If you cannot tell employees something, at least tell them why you cannot tell

them

The issue of communication in the workforce is one of great breadth and size that covers

many different sub topics. Certain advances in technology have helped modern

communication, but at the same time, have created other issues that must be considered

when examining the communication process. One of the positives of the introduction of

technology to the communications process is the ability to communicate with many

employees quickly, without regard for geographic location. An issue that exists in

43


communicating with employees electronically is that most senders of information expect

that when a message has been sent, and subsequently received, that it has been

understood as intended. J. Douglas Brown (1973) said: “The complex of technical

devices which have come to facilitate the process of communication in larger

organizations tends to divert attention from the essential truth that effective

communication is more a matter of minds than of machines” (Brown 1973). It is very

easy to get lost in the technological advances that are related to communication.

However, it is important for organizations to concentrate on effective communication and

not get distracted by the technology itself (Harshman and Harshman 1999).

As this analysis indicates, effective organizational communication plays a major role in

employee satisfaction. Although this paper deals with specific components of the

communications process in the workplace, there are broader, general techniques that

managers can use to ensure open communication in the workplace. The following is a list

of ten general tips to consider when addressing communication in the workplace

(Flaherty):

1. Overcommunicate

Increase the frequency of your communication, particularly during

periods of rapid organizational change. Tell your employees what

you know, even if you preface it with “Based on what I know

today…but it could change tomorrow.” Telling employees what you

know, even if it may be subject to change, helps build trust. On the

other hand, withholding information erodes trust levels between

management and employees.

44


2. Keep Your Door Open

Whenever possible, keep your office door open. In addition, make

sure your body language also tells employees that you have an open

door policy. Crossing your arms, sighing over interruptions, and not

looking at the speaker all say that you may be accessible, but not

approachable.

3. Review Schedules

Keep your employees updated on your schedule. Knowing your

schedule will help them prioritize their work and allow them to make

better decisions relevant to supporting you. Knowing their schedules

will help you understand their current pressures.

4. Offer Assistance

On a regular basis, ask your employees, “What do you need from

me?” Doing so gives employees the opportunity to update you on

projects. It also prompts you to provide the information needed to

keep those projects on schedule.

5. Call In Frequently

If you are away from the office, touch base with your support team

on a regular basis. Doing so allows you to respond quickly to

messages and troubleshoot potential issues that may have surfaced in

your absence. It also says to your employees, indirectly, “I care

enough to check in with you when I’m gone.”

6. Hold Regular Meetings

Keep employees informed about management decisions, goals, and

direction. Allow employees time to question issues that impact them.

45


Have employees update one another on the status of their projects.

Scheduling short, well-planned departmental meetings on an ongoing

basis will not only keep employees informed, but also boost team

effectiveness.

7. Keep Personalized Files

Keep an anecdotal file for each employee. Doing so will help you

stay informed and current about that particular employee. A simple

note saying “Janice said that she plans on taking a computer course

in the fall” will not only help you remember the fact, but impress

Janice when you bring the point up in later conversation.

8. Conduct Quarterly Reviews

Want to make annual reviews less dreaded for both manager and

employee? Conduct quarterly reviews. Doing so allows the employee

time throughout the year to address performance issues. Meeting

with an employee on a quarterly basis also conveys to an employee,

“Your success is important to me.”

9. Tackle Tough Issues

Conflict is alive and well in most organizations. What differs from

organization to organization is the way conflict is handled. Healthy

organizations address conflict. We recently ran across the term

“carefrontation.” It takes courage and guts to honestly communicate

the real issues to people. When you do not honestly discuss but

instead sidestep the tough issues, employees may feel that you do not

care. If you do care, you will confront people with compassion.

46


When you honestly communicate, even the tough issues, people trust

you because they know you really value them.

10. Commit to Communicating

Communication is an art, not a science. You can easily learn

principles related to communication, but to become a master, you

must practice. Monet was not a great artist the first time he put a

brush to canvas. It took years of practice! With practice and

commitment to effectively communicating with employees, you will

eventually become known as a great boss.

These tips are not meant to be an over simplification of the communications process in

the workplace, but only as indicators for the foundation of an effective workplace

communications strategy that will enhance employee satisfaction.

An often over looked aspect of effective communication is listening. Listening is just as

important as speaking, when it comes to communication. The supervisor who is a good

listener is more likely to have employees who help identify and solve work related

problems. It is important for managers to be aware of barriers that exist when receiving or

listening to messages, just as they must do when sending messages (Slagle 2006). High

performing organizations provide channels for upward communication and listen to what

employees say. A common factor revealed at many high-performing organizations is the

very effective channels of communication that exist from the employees up to

management. In these organizations, employees feel that their messages are heard by

management and quite often used in the decision making process (MacGregor 2006).

Employees have an intrinsic need to know that their input counts and that when they

47


attempt to communicate with management, the message is received and understood. All

staff, no matter their length of tenure should have frequent opportunities to clarify goals

of their work and give and receive feedback about how they perform their jobs. It does

not matter what the content of the message may be, as long as workers feel that they can

effectively and openly communicate with the management of the organization

(Communications Strategy 2006).

Employee Satisfaction and Teamwork

Only motivated, committed workers can successfully compete in the global marketplace.

Working smarter can only be achieved with an involved workforce. Teamwork has been

proven to improve many of the factors related to employee satisfaction that includes

increased motivation and productivity (Harper 1994). Teamwork is now being used as a

behavioral modification tool, used to increase employee satisfaction and motivate groups

of employees toward organizational goals and objectives (Morley and Heraty 1995). The

assumption behind teamwork is to upgrade autonomy that is realized in terms of

identifying the best way of practicing a job to achieve the highest performance through

continuous search of employees for alternative ways of work practices. Increased

autonomy is expected to foster self-fulfillment and make jobs significant (Ross 1999).

Teamwork is often viewed as an efficient and motivating method of coordinating and

condensing the individual contributions of individuals into one cohesive outcome. In this

regard, teamwork is viewed as a motivational tool for the purpose of enhancing

individual input and involvement through a group of employees working together in team

environments (Rodwell et al. 1998).

48


Teamwork is not a new concept. Americans have cheered on their teams for as long as

there have been teams. However, the concept of “teams” has tended to be relegated to

sports and media, rather than in business environments (Wellins et al. 1991). The sports

analogy is often used to cite the benefits of teamwork in organizations. The idea being

that a true team is a group of cohesive equals with a common goal. The team functions as

an organic whole where the group truly is greater than the sum of its parts. The term

“self-directed work teams” has been used since the 1950’s to describe teams of

employees working together toward one common goal. There is no universally accepted

way of designing one of these teams because the formation process should be

participative, and will probably differ from organization to organization. In the “typical”

work environment, a self-directed work team is an intact group of employees who are

responsible for a “whole” work process or segment that delivers a product or service to

an internal or external customer. In essence, individuals work as an autonomous team that

plan and control their work in order to achieve specified organizational goals and

objectives (Wellins, et al. 1991).

Extensive research in the field of employee satisfaction has supported the hypothesis that

employees derive pleasure and satisfaction from socializing with their co-workers, with

the greatest source of satisfaction coming as a member of an “on the job” team. That is a

tremendous source of morale for employees. In fact, a good deal of the interaction while

socializing is work related. Teamwork contributes to an environment of socializing

between employees, in regard to work matters as well as non-work related matters. This

49


socializing contributes to a solidifying of relationships between employees. This social

interaction and team environment leads to the establishment of an effective and cohesive

work community (Sirota et al. 2005). Although teamwork has been shown to improve

employee satisfaction and worker productivity, it is often not managed well or even

promoted by some organizations. Teamwork requires dedication and attention from

management in order to be an effective morale and production tool. Teamwork is an

important factor to manage well. Teamwork requires constant managerial attention and

knowledge of the important elements associated with effective teamwork. Managers

should understand the personalities involved in teams, the forming process, and the

factors associated with successful team formation (Special 2006).

Teamwork carries with it the connotation of collective thought and action. Ironically, the

research that has been done on teamwork shows that the process actually encourages

autonomy and personal flexibility. Due to the continuous improvement principle,

teamwork is expected to give rise to increased involvement in decision-making and

greater responsibility that requires a wide array of skill base leading to higher complexity

and autonomy. Several researchers have found that employees realize greater job

satisfaction and autonomy when able to work in teams (Ascigil 2003). Therefore, an

organization that promotes and encourages teamwork, and that provides an environment

receptive to teamwork, stands to improve both employee satisfaction and productivity. It

is claimed that the experiences of employees about team-based initiatives are shaped by

multiple factors. Organizational behavior research has shown that management practices

give rise to particular job attitudes on the part of employees. It has been found that the

50


participation associated with teamwork leads to positive effects on job satisfaction and to

the commitment level of employees (Boshoff and Mels 1995).

Thus far, this section has focused on the positive attributes and benefits that stem from

effective teamwork in an organization. There are however, negative effects of ineffective

teamwork, or dissatisfied members of a team. When a member of the team experiences

problems or worse yet, causes problems for other members of the team, the affected

employee is not the only one that suffers. In fact, the issue may result in a breakdown of

team cohesiveness and productivity. In fighting by team members cannot only cause team

ineffectiveness, but also lead to individual mistrust and paranoia (Sirota et al. 2005).

Because teams are a composition of individuals, they present many unique problems that

must be addressed in a timely manner by management, as well as by the team members

themselves. Quite often teams experience problems during the formation and norming

stages of team development. Going in circles is a perfectly natural evolutionary stage and

one that is important for the development of the group. Teams must go through different

stages of formation in order to achieve autonomy as a group element. It is necessary for

teams to experience tension and conflict on its way to becoming an effective entity.

Groups that recognize and deal with conflict early on are much better equipped to handle

issues that may arise later in the process (Wellins et al. 1991).

In addition to the employee satisfaction benefits that an organization is able to reap as a

result of effective teamwork, there are other tangible benefits as well. These include

employee empowerment, trust in management, and an engendered feeling of

51


organizational involvement. Employee involvement practices have been one of the

techniques extensively used for improvement purposes by pioneering organizations.

Among those initiatives, redesign of work combined with job enrichment are two that are

widely aiming at quality increases by creating jobs that entail autonomy and feedback.

All of which are accomplished by effectively employing a teamwork strategy (Hackman

and Oldham 1980). As was previously stated, management has an important role in

ensuring the success and intended outcome of teamwork in the organization.

Management needs to fully understand the teamwork concept and realize that unless

management behaves differently, nothing will change. Management needs to give the

work-teams clear direction on what needs to be accomplished and autonomy and control

over how they do the tasks. Teams should be given clear guidelines and understand the

parameters that they are empowered to work within (Harper and Harper 1994). With the

proper guidance, team members learn to act more like managers that are part of a larger

organizational focus. Both management and the employees in the team can learn from the

teaming process while contributing to the accomplishment of organizational objectives

(Wellins et al. 1991).

Employee Empowerment

Empowerment in the workplace is an often-misunderstood concept. Employee

empowerment is a term that many managers and organizations think they understand, but

few actually do, and even fewer really put into practice. Many managers feel that by

empowering employees, they relinquish the responsibility to lead and control the

organization. This is not the case. Empowerment is actually a culmination of many of the

52


ideas and tenets of employee satisfaction that have been discussed previously in this

paper. For an organization to practice and foster employee empowerment, the

management must trust and communicate with employees (Fig. 5). The single most

important element of employee empowerment is communication. Consistent

communication from management in regard to every facet of the organization empowers

the workforce and engenders a feeling in them as active participants in the success of the

company (Adams 2006). Employee empowerment has been described and defined in

many ways but is generally accepted as: the process of enabling an employee to think,

behave, act, react, and control their work in more autonomous ways, as to be in control of

one’s own destiny. Effective employee empowerment not only has positive implications

for employee satisfaction, but also many other organizational facets, such as customer

service and retention. This section of the paper will consider the implications of

employee empowerment as a factor in employee satisfaction.

Figure 5: Leadership for Empowerment

Source: Nova Southeastern University

53


A great deal of managerial discussion has centered on the need to empower employees

and give them a sense of ownership and pride in their work. Options have included

flattening organizational pyramids and using team management. Many companies

actually set out to increase employee empowerment by attempting to increase the level of

entrepreneurship within the company (Denton 2004). Traditionally, entrepreneurship has

been thought of as a concept of independence and self-direction, a concept that is

diametrically opposed to the process of a synergistic organization. However, the concept

of entrepreneurship has been employed in successful organizations and is often referred

to as “corporate entrepreneurship.” Corporate entrepreneurship focuses on ways to

encourage entrepreneurial activities in corporations, and seeks to identify relevant factors

associated with corporations that exhibit characteristics most often associated with the

individual entrepreneur (Gartner 1988). The concept of corporate entrepreneurship is

becoming more important to organizations everywhere as the need increases to retain

good employees, while at the same time needing to constantly compete and innovate.

Empowerment and entrepreneurship can be synonymous terms when trying to prompt

employees to operate with more autonomy, take action, and ultimately control their own

destiny. This motivational action often leads to employees feeling more independent and

in control of their work situation, which in turn, is translated into greater effort and

improved work productivity (Miecevole 2006).

The most important factor in effective employee empowerment is bilateral

communication. Employee surveys and evaluations show repeatedly that empowerment

and communication rate highest in regard to employee satisfaction in an organization

54


(Appendix 4). Companies committed to employee empowerment provide more

information in greater detail than the average company. As previously mentioned, a key

to employee empowerment is effective and honest communication. It requires that

management increase the amount of time they devote to actively communicating with

employees, as well as how they go about doing it (Hildula 1996). Communicating and

sharing information accomplishes several objectives that are not only important for the

empowerment process, but also for overall employee satisfaction with the organization.

The sharing of information lets people understand the current organizational situation in

clear terms. It begins to build trust throughout the organization and breaks down

traditional hierarchical thinking. Information leads to employees accepting more

responsibility, making informed decisions, and having an understanding of the goals and

objectives of the organization. Information ultimately empowers employees to act as

stakeholders of the organization (Blanchard 1996).

It is also important to remember that communication must work both ways. That is to

say, employees must be allowed to have a say in issues that they are required to work

with. This includes the opportunity to offer ideas and solutions to situations that may

confront the organization. An important factor to consider when discussing idea

generation is the treatment of the people involved in the process. It is vital that the

participants receive feedback and feel that they have ownership in the process. “People

must know that their ideas will be listened to and, if they have merit, acted upon. If they

do, it is possible to mobilize individual creativity on a very broad scale” (Champy 1995).

55


Making sure the participants are treated fairly and as equal partners in the process is a key

to successful innovation and creativity.

Everyone involved in the process must believe that anything is possible and that

exploring new paradigms and ways of thinking are the goals. Fear of failure and

retribution for unsuccessful ventures cannot be presented as impediments to the process.

“Punishing the innovator when an innovation fails is the best way to ensure that no one

ever attempts to be innovative” (Hammer and Champy 1993). One last note about the

people involved in the process is in regard to the hiring of the people themselves. Far too

often we hire people in our own image. By doing this, we inadvertently create a uniform,

standard line of thinking and methodology. The most efficient way to introduce creativity

and innovation into an organization is by hiring creative and innovative people. In order

to effectively do this, the leadership of an organization must be willing to step outside of

their comfort zone and hire people that may be different from themselves (Freiberg

2004).

Employee empowerment requires a strong and lasting commitment from an

organization’s management. A pervasive misconception in relation to employee

empowerment is that it is a top down desire. Employee empowerment comes from the

individual. That is not to say that management ceases to have the responsibility to lead

the group and is not responsible for performance. In fact, companies that seek to

empower employees demand stronger leadership and accountability. This strong

leadership and accountability must start at the very top and permeate all levels of

56


management. Once the organization becomes a cohesive, understanding team, the real

benefits of employee empowerment can then be realized (Butcher 2006). It is up to the

management of an organization to lead the empowerment process, even though it is most

likely the employees that are advocating the issue. Creating and stimulating employee

empowerment in established organizations is not an expeditious proposition. It is an

easier proposition in newer organizations where the leadership has made empowerment

of its employees a priority from the beginning. For this reason, it is incumbent on the

leadership of established organizations to demonstrate the benefits and expected

outcomes of employee motivation initiatives to employees (Fox 1998).

Employee empowerment is an acknowledgment by an organization’s management that

they realize that their employees have a lot to offer. Employees derive satisfaction from

many aspects of employee empowerment endeavors, not the least of which are the

corresponding benefits that allow an organization to become more competitive,

profitable, and innovative. An organization can realize many benefits from learning how

to properly empower its employees; not all of which are strictly monetary. Empowered

employees can have many positive effects on an organization’s performance as a result of

the innovation that comes with empowerment. Empowered employees that operate more

independently tend to be more creative and innovative, thereby benefiting the

organization in possible other ways (Hayes 2003). Traditional top down management

tends to stifle worker productivity, create barriers to innovative solutions, and adversely

affect employee satisfaction. Employee empowerment utilizes a participatory

management style that requires a great deal of employee involvement to be successful.

57


The concept of employee empowerment differs from traditional workplace

democratization initiatives because of the extent to which employees have control over

the outcomes of their own performance. (Dimitriades 2001).

The government has also researched the benefits of empowering employees. In a 2005

review of 100 workplace studies, the U.S. Department of Labor examined the link

between progressive employment practices and improved bottom line results. The

Department found that “a positive correlation exists between motivating and empowering

employees and significant improvements in productivity, employee satisfaction and

financial performance” (Clark 2006). Many employees that are not empowered by their

organizations feel underutilized, micro-managed, and helpless to make positive changes.

These feelings and attitudes not only adversely affect the employee, but also the

organization. As has been stated before, research has shown that empowered employees

improve organizational performance and possess higher rates of satisfaction. A major

competitive advantage that stems from an organization empowering its employees is the

universal understanding and support of the organization’s goals and corporate strategy

(Vinas 2001).

A good lens by which to examine the employee and organizational benefits of employee

empowerment is through the customers of the organization. It is a well-known fact that

companies who are truly successful in delivering exceptional customer service have

several traits in common, one of which is employee empowerment. This empowerment is

exhibited by employees that are able to make on the spot decisions for the benefit of

58


customer service delivery (Healey 2006). There are now many companies that tout

employee empowerment as a selling point to prospective customers. They advertise the

fact that the employee empowerment philosophy allows their employees several

important capabilities, including the ability to respond intelligently and independently to

customer needs, and make critical decisions on-the-spot. Because employee

empowerment leads to more satisfied and motivated employees, organizations are able to

deliver higher quality, lasting customer service (Catapult 2006). Since our society has

become a “service” related society, with a service-based economy, empowering

employees to make customer service related decisions is imperative to organizational

success. It is necessary for customer service employees to exercise a higher level of

personal judgment than their manufacturing counterparts because of their proximity to

the customer service delivery experience (Huq and Stole 1998). Using this reasoning, one

can easily see that empowering employees to make customer service related decisions

will result in the satisfaction of the customer, employee, and subsequently, the

organization.

In addition to the employee, organizational and customer benefits already cited here,

employee empowerment holds added benefits and outcomes for employees. One of the

measures of success for any organization is the personal growth and development of its

employees. Empowerment allows employees the opportunity to build on their current

skill set. Being empowered gives them the ability to use all the skills that they already

possess as well as gain new skills and experiences. Being able to practice these skills and

exercise their creativity and innovation will help them improve upon future performance

59


(Hayes 2003). When encouraged and managed properly, empowerment can be a great

solution for many organizational problems. Once organizations and employees are able to

understand and practice employee empowerment, they can then begin to recognize

personal and corporate growth that results from the empowerment initiative (Butcher

2006).

Interaction in the Workplace

Trust and a positive work environment are important elements in developing

interpersonal relations at work (Billikopf 2006). Employees gauge how they are regarded

by management in many ways, but the words that managers’ use and the way they are

delivered are critical to employees’ perceptions of whether they are respected or

disrespected. A multitude of job satisfaction surveys indicate that when employees are

treated with respect by the management of an organization, the organization reaps the

benefits of increased retention, increased productivity, and an overall increase in job

performance. However, When employees do not feel respected the results are

correspondingly negative (Pounds 2006). This section of the paper will focus on key

elements of interpersonal interaction with employees, such as: empathy, sensitivity,

conflict resolution, stress, sexual harassment, and creating a generally accepting and

congenial workplace, all of which are key elements in employee satisfaction.

People’s reactions to change are generally not logical from an outsider’s (ie. Manager’s)

perspective. People react according to their own needs at the time. People differ in the

value they place on satisfying different needs, so people’s reactions to any change will

60


differ from person to person. Empathy is generally considered the ability to put one’s self

in the position of another and try to understand the emotional impact on them as a result

of the situation (Bacal 2006). An important part of supervision and management is the

ability to react empathetically when necessary, in order to foster a perception of

understanding and be able to promote employee satisfaction. Research has shown that

empathy, to a certain degree, is an innate emotion that most humans are born with. For

example, babies seem to understand sadness and crying, or the laughter of others. The

research also shows that empathy can be coached, trained, taught. In his book Emotional

Intelligence, Daniel Goleman’s (1995) identifies five emotional competencies. “Among

them are four that appear to be necessary to manage others respectfully: the ability to

identify and name one’s emotional states, the capacity to manage one’s emotional states,

the capacity to read, be sensitive to, and influence other people’s emotions, and the

ability to enter and sustain satisfactory interpersonal relationships” (Pounds 2006). These

four competencies are all related to the ability of a manager to be empathetic toward

employees.

In order to promote employee morale and maintain employee satisfaction, it is necessary

for supervisors and managers to display the ability to be sensitive to the problems

workers occasionally have. Accepting an occasional request for a sympathetic, listening

ear, or for advice, is simply part of a supervisor’s job. A supervisor who can help workers

cope with their difficulties may deflect further exacerbating issues stemming from the

original problem. The sooner workers cope with their problems, the sooner they can

concentrate on their jobs. This does not mean to infer that supervisors and managers need

61


to become personally involved with an employees situation, but rather be able to help the

employee to find a resolution to the problem (Billikopf 2006). The point is to be sensitive

and approachable to and for employees. This does not always have to be on a reactionary

basis and may result in increased employee satisfaction if done on a proactive basis.

Toward this end, supervisors and managers should begin to understand each person as a

distinct individual with unique problems and passions. As an example, child care is often

a concern. If you can exhibit sensitivity for that issue, in most cases, you could mitigate

anxiety by helping people integrate their children into their work lives. Many employees

will react to this positive outcome by performing at a higher level and exhibiting greater

energy for their work (Freiberg 2005).

It is an obvious assumption that employees are satisfied when their work situation is

congenial and free from conflict. However, this cannot be the case all of the time.

Conflict is an inevitable part of our workday life as different values and points of view

provide richness and tension. When conflict in the workplace does arise, the impetus is

on management to actively take steps to resolve the conflict (Melamed 1996). Conflict

resolution is not meant as a tool to give employees what they think they deserve, but as a

way to settle differences that may arise in the workplace. The main reason to confront

conflict is to reach a resolution. Without resolution, conflict merely becomes an

opportunity to recycle old arguments and disagreements. When conflict is unresolved, it

takes on a life of its own and eventually produces damage that could have been

prevented. Proactive organizations provide an atmosphere conducive to resolution and

opportunities for employees to voice concerns and be involved with change processes

62


(Kemp-Longmore 2000). If employees understand that potential conflict will be dealt

with in a constructive manner, they will tend not to let issues fester to the point that job

performance or others are adversely affected.

Many times conflict in the workplace is the result of two employees that experience

issues with one another. When this is the case, mediation may be the best course of action

for an organization to implement. The mediation process attempts to amicably settle a

disagreement between two parties by using an objective, third party as an arbitrator in the

dispute. This Mediator listens to the positions of the parties, considers amicable

alternatives, and offers a potential solution to the issue (Mediation 1997). Mediation is

not used solely for the resolution of problems between two individuals, but also for issues

that may arise between departments, divisions, or teams within an organization. The

mediator can design and facilitate a process that creates a safe place to focus on what is

not working in the group(s), and help find ways to bring new focus and clarity. The

objective of conflict resolution, whether for individuals or groups, is to promote

understanding and enhance employee satisfaction in the workplace.

Another important factor in maintaining overall employee satisfaction in the workplace

for organization’s is the ability to establish boundaries. Anytime a group of people works

together in one place, boundaries must be established, whether formal or informal. A job

description should set the basic parameters or boundaries for individual responsibilities,

but these boundaries will probably need to be further defined. Interpersonal parameters

should be negotiated as well. Because boundary issues can have an impact on

63


productivity and employee satisfaction, the leadership of an organization should address

them and establish parameters (Leadership 2006). The definition of a boundary is the

ability to know where you end and where another person begins. Typically, when terms

like space, limits, and autonomy are used, they are in reference to boundaries. It is not a

correct assumption that having good boundaries will result in distancing employees from

each other (Gafner 1996). When clear formal boundaries have been established and

delineated, it will be easier for informal boundaries to be formed. The term “boundaries”

is a very broad term that can encompass: physical space, sexual harassment, acceptable

language, authority, processes, and general operating guidelines. If organizations take the

time and effort necessary to establish formal boundaries, employees will possess an

understanding of the expectations and be prepared to deal with situations related to

boundaries.

Interaction in the workplace and the effective use of interpersonal skills is a factor in

creating a congenial workplace environment and sustaining employee satisfaction.

Managers should understand that bad employee interaction or incorrect use of

interpersonal skills will adversely affect employees’ attitudes and performance. Because

people congregate at the workplace everyday, each with their own issues and sets of

circumstances, the workplace experiences its share of negative communication. An

organization is defined by its structure and rules. The more employees know and

understand about the organization’s structure, the more efficient the organization will

operate (Kirby 2002). The main point is that if employees understand that the

organization has policies and procedures in place to deal with issues relating to

64


interaction in the workplace, they will be better prepared to deal with related situations

when they arise. Knowing that there are defined expectations for interpersonal

communications will lead to increased productivity and increased satisfaction in the

workplace.

Organizational Culture/Employee Focused

Organizational culture is generally defined as the ways of thinking, behaving, and

believing by the members of a particular social unit (Cooke and Rousseau 1988). Culture

may also have indirect effects on performance in benefiting other aspects of an

organization. For example, researchers have found that organizational culture is linked to

service quality and employee performance, both of which have been identified as

fundamental links in Harvard’s Service Profit Chain leading to subsequent consumer and

financial success indicators (Klein, Masi, and Weidner 1995). As this paper has stated,

the key to enhancing employee performance is the ability of an organization to maintain

employee satisfaction. Therefore, establishing an organizational culture that promotes the

elements necessary to enhance employee satisfaction would prove to have a positive

affect on customer retention and corporate profitability as well.

It was not that many decades ago when businesses viewed people as machines. During

the Industrial Age, the little attention that employees did receive was focused on speeding

production, mechanizing human movement and ensuring a consistent product. Business

leaders wanted employees to follow orders and suppress individuality. Today, we

recognize that people are not machines, but powerful resources that help business

65


succeed. Employees are now recognized for their important creative and innovative

contributions to industry and business in general (Frazee 2004). This paper has thus far

focused on many of the elements necessary in order to promote and sustain employee

satisfaction. These elements however, need a fertile ground for implementation and

sustainment. This section of the paper will consider the importance and necessity of an

organizational climate that will allow these elements to thrive and continue to promote

employee satisfaction to the maximum extent possible. Many different facets of

organizational behavior that would be conducive to fostering these elements such as:

leadership attitudes, assessment programs, HR focus, the learning organization concept,

organizational structure, organizational values, and the people first concept, will be

examined (Appendix 5).

The tone of an employee-oriented organization is set at the very top of the organization

with its senior management team. The leadership of an organization must set the example

for employees and communicate and exhibit the traits of commitment, honesty, ethical

behavior, and teamwork. The following six behaviors are essential for leaders in

establishing an organizational atmosphere conducive to a high level of employee

satisfaction:

Create an environment for empowerment

Create an environment for innovation

Create an environment for organizational agility

Create an environment for organizational learning

Create an environment for employee learning

Create an environment that fosters and requires ethical and honest behavior

66


These behaviors serve to instill a trust in management by employees that is necessary to

cultivate an atmosphere of mutual trust and commitment.

Figure 6: Management/Employee Performance Cycle

Source: Ventana Research

Organizations are facing major challenges in the modern day marketplace that often times

have adverse effects on employees. Because employment environments have become so

complex, the need for effective and enlightened leadership has become essential (Earle

1996). Success in this dynamic business environment requires that everyone in the

organization trust one another and be working toward the same common goal (Fig. 6).

This should be the goal of leaders seeking to leverage the satisfaction of their employees

in order to achieve maximum benefit for the organization.

Leaders can create cultures, whether it is a culture of service, profitability, or employee

focus. There are many examples of this from Southwest Airlines to Wal-Mart. Leaders

must practice what they preach and pledge tangible support to initiatives that have been

planned and promoted to the employees of the organization. If an organization

67


communicates to its employees that they are valuable and essential to the success of the

company, they must act upon this notion. If these organizations fail to invest in the

development of their workforce, they are sending a message that their statements are

nothing but shallow and unsubstantiated talk (Frazee 2004). In an effort to stay

competitive and increase margins during the recent past, organizations have focused on

automation and processes. Many organizations have just focused on operational

efficiency, which is only one piece of the larger business performance puzzle. The most

important asset, the one that operates and manages the business, are the employees of the

organization. Having a motivated and satisfied workforce has a positive effect on the

performance of the business (Smith 2006). Good leadership can assure an organizational

atmosphere that will accomplish business goals, and at the same time, assure a high level

of employee satisfaction by maintaining a strong focus on the employees of an

organization.

An important element of creating an organizational environment that is conducive to the

input and suggestions of employees is the ability of employees to provide feedback to

management. A particularly effective way of doing this is through the use of an employee

survey or assessment. Progressive organizations attempt to survey their employees on a

regular basis in order to gauge the level of commitment and satisfaction of the workforce.

This proactive approach captures the voice of the employees and provides actionable

feedback to management. This will most often result in such benefits as enhanced

leadership, enhanced strategic planning, collaborative efforts, more effective

communication and employee teamwork. Collaborative, forward-thinking organizations

68


understand that fostering a culture of employee satisfaction requires direct input from the

organization’s employees. In order to remain pertinent and valuable, the attitudes and

input of the employees should be assessed on a regular and continual basis. Employees

should be involved in assessing the different aspects of the organizational culture.

Organizational leadership should strive to measure all parts of the business that can have

an effect (positive or negative) on the quality or impression of an organization’s culture

(Frazee 2004).

The employee satisfaction objective recognizes that employee morale and overall job

satisfaction are now considered highly important by most organizations. Having satisfied

employees is not only an ethical consideration for organizations, but satisfied employees

are also necessary for increased productivity, customer service delivery, and the ability of

the organization to exist as an economic entity (Kaplan and Norton 1996). If employees

understand that they will be given the opportunity for input in a non-judgmental forum,

without fear of retribution, they will be more willing to do so. Their satisfaction and

confidence in management will be enhanced if they are able to see action taken on the

concerns voiced, or feedback given during the survey process. Employee satisfaction

surveys should be taken very seriously and management should act on the results, as

employee satisfaction is a direct indicator of employee retention and employee

productivity. A well-designed survey may generate actionable information about

employee morale, and/or the efficiency and effectiveness of work and organizational

processes. Employee surveys can play an important part in improving elements related to

69


enhancing the abilities of an organization to function more effectively in every respect

(GuideStar 2006).

Organizations that considered themselves to be human resource focused concentrate on

ways to enable employees to develop and utilize their full potential. They also undertake

efforts to build and support a conducive environment for employee growth and

development (Human 2006). In an attempt to be more relevant in today’s rapidly

changing business environment, some organizations are redefining the human resources

function in order to better serve company and employee needs. “At Eastman Chemical

Company, human resources is matrixed to the business organizations, and as a business

partner it is responsible for helping to define the needed competencies as the first step in

hiring the right people” (Lancourt and Savage 1995). This strategy allows the human

resource function to operate with more agility and be more responsive to both the needs

of the company and the workforce.

Throughout this paper effective communication processes and methods have been linked

to increased employee satisfaction. Communication is also an integral part of

organizational behavior, often referred to in this context as knowledge sharing.

Knowledge sharing can have a significant impact on employee satisfaction and should be

considered a key factor in any organization’s culture. There is a revolution going on in

the workplace. Knowledge is replacing infrastructure and empowered self-starters are

replacing direct supervision. Instead of multi-tiered hierarchies, computer networks and

virtual teams are replacing human management and committees. Internet connections

70


have replaced the need for co-workers to be located in the same geographic location

(McShane and Von Glinow 2004). We live in a knowledge-driven economy.

Organizations are only as intelligent as the individual employees that make them up.

Corporate entities therefore, are only as good as their people (Bradley and Russiello

2000). For these reasons, it is imperative that organizational cultures be adapted to

communicating effectively in such environments.

The subject of formal knowledge management systems is a complex issue and will be

addressed more comprehensively later in the paper. From an organizational behavior and

culture perspective, management of an organization should recognize the importance and

impact on employee satisfaction, of an effective knowledge management strategy. Two

important factors concerned with knowledge management strategies are employees

having unfettered access to knowledge from all areas of the organization, as well as

having access to information they need to efficiently perform their jobs (Trubisz 2006).

Because of rapid technological advances and changes in the way that employees

communicate with peers, subordinates, management, and customers, organizations need

to examine how information and knowledge is communicated. These technological

advances in communications and knowledge management are reshaping the field of

organizational behavior, and require a defined culture in order to be effectively managed

by employees.

An element of organizational culture that has a profound effect on employee behavior

and satisfaction is the structure of the organization. Organizational structure is the

71


established formal hierarchy of positions, roles, and work flows within an organization

(Porras and Robertson 1992). This structure represents the coordination of the different

functions within the organization that work together toward the accomplishment of

organizational goals. Within this structure there exists defined roles of authority,

divisions of labor, and assignment of responsibility (Tetrick 1995). Issues may arise if the

organizational structure is too hierarchal in nature and becomes too bureaucratic for

employees to understand or work within its structure. Learning organizations eliminate

the traditional organizational hierarchy and instead promote local control and decision-

making. Learning organizations invest in improving the quality of thinking, the capacity

for reflection and team learning, and the ability to develop shared visions and shared

understandings of complex business issues. Organizations that are able to exhibit

structural flexibility and the ability to evolve will maintain a competitive advantage over

the hierarchal competition (Senge 1990).

Organizational values are an important factor in supporting employee morale and

satisfaction. However, leaders of organizations cannot be perceived as hypocritical when

it comes to living the stated values of the organization. There are many studies that have

shown the power of meaningful values to energize employees, providing them with a

sense of purpose and identity in an ever changing and dynamic work environment.

Building bricks and mortar facilities is an easy task for companies. However, the

challenge for organizations is to build an environment of trust, respect, and open

communication. It is the establishment of these values that will help an organization

establish and promote its reputation, highlight their values, and create an environment

72


that is sought out by employees (Freiberg and Freiberg 2004). The most important aspect

of establishing organizational values is the ability of employees at all levels to trust the

values and not view them as just an attractive tag line on a lobby sign.

Employee Benefits

Due to escalating costs, family needs, retirement, flexibility and a myriad of other

personal desires, an employees’ benefits package has become an important part of their

job, as well as their level of commitment to and satisfaction with the organization they

work for. Because of the costs involved, many organizations today have to make a

choice: Offer an attractive benefits package and forgo profits, or cut back on employee

benefits and risk harming employee morale or even losing good employees. With the

ability to maintain qualified and satisfied workers at a premium today, providing

attractive benefits to employees is an important consideration for any organization. Due

to an exponentially increasing economy and a growth in new businesses, employees in

many cases, have the advantage in employment negotiations (Ruddy 2001). Employees in

today’s economy expect more than just access to reasonable employer provided medical

insurance. Other benefit considerations may include: dental insurance, eye care,

accidental death, short-term and long-term disability insurance, generous vacation,

holidays, sick/personal days, pension plans, dependent care, flextime, and various other

possibilities. The key for management is to be able to provide as many of these benefits

as possible to ensure an adequate level of employee satisfaction, while at the same time

being able to maintain organizational profitability.

73


Most employees require, at a minimum, some sort of employer provided healthcare plan.

This employee requirement is being bolstered by many states that are now requiring

employers to provide at least a basic form of healthcare coverage for their employees, or

face fines, penalties, or a minimum payment into a state funded plan that would then

cover their employees. The realities of rising healthcare costs have resulted in employees

being forced to accept a greater financial burden in order to cover costs and still keep the

expenses at a reasonable level for the organizations that they work for. Although this

negatively impacts employee satisfaction, the situation is much the same at every

organization throughout the country. A large appliance manufacturer based in Ohio has

had to engage the assistance of its employees in order to continue to offer a viable

medical benefits package. “To continue offering good health coverage to some 24,000

U.S. employees, Whirlpool would have to revamp its approach. Employees would be

asked to meet the company halfway” (Huff 2005). Although employee satisfaction is

initially negatively impacted by the situation, organizations that work with their

employees to improve their medical benefits will engender positive sentiments at the end

of the process.

The negative ramifications stemming from an organization’s resistance to work with their

employees on maintaining or bettering their medical benefits can be devastating to the

morale of the workforce. Wal-Mart is the latest example of this, as exhibited by a recent

internal memo that was made public referring to high medical coverage costs, and the

impending need to hire healthier workers. Although the memo proved devastating to the

morale of the workforce, as well as being a public relations nightmare, it did point out

74


certain realistic issues associated with providing adequate healthcare benefits to

employees. Wal-Mart’s efforts capture the struggle that all of corporate America is

having in trying to control fast-growing health and benefits costs. And the most

frightening statistic in the memo is this: Only 48 percent of all Wal-Mart employees are

covered by the company health plan (Hollan 2005). If these percentages rise much

higher, Wal-Mart and its employees could face an insurmountable crisis, as could many

other businesses in America.

A benefit that organizations are able to offer most days that can have a constant, positive

affect on employee morale is a flexible work schedule or liberal time-off policy. With

vacations shrinking, flexible time-off plans are increasingly being regarded by both

workers and employers as the best way to ensure that employees actually take days off

when they need them. Sixty-three percent of U.S. companies now use some form of

flexible paid-leave bank, compared with 21 percent in 2000 (Weber 2004). The number

of hours of work a job requires, the arrangement of hours, and freedom (or lack of it) in

determining work schedules effect the non-work part of a person’s life, the time available

for family, leisure and self-development. There is a growing dissatisfaction on the part of

employees over the number of hours they are being required to work, excessive overtime

requirements, and a sense of inflexible work hours (Milkovich and Boudreau 1997).

Organizations that are able to allow their employees flex time schedules, often find a

higher level of employee morale and satisfaction as a result of being able to offer the

benefit.

75


Another major benefit focus that can affect employee morale is having a viable

retirement benefit available to employees. With the future of social security benefits in

the U.S. being uncertain, at best, employees seek to ensure that there is some form of

employer assisted or provided retirement plan available to them. Anyone who has

examined the American social security system to any extent knows that the system is in

danger of insolvency in the very near future. Because most Americans will spend 20% to

25% of their lives in retirement, financial security after employees retire is a major

consideration (Taube 2001). Because retirement is such an important and ever present

topic for most workers, organizations that provide retirement benefits to their workforce

are in a better position to enhance employee satisfaction with the organization’s benefit

package.

Employee Motivation

Motivational theories were briefly mentioned in the motivation and recognition portion

of this paper. This section will offer a more in-depth, analytical perspective of

motivational theories. Many of the topics covered thus far in this paper are elements that

serve to motivate employees such as: development, compensation, training, etc.

However, in addition to these elements that motivate employees are the theory and

practice of motivation that can be practiced actively in the workplace. This section will

examine several of these theories and practices, as they relate to employee motivation and

overall satisfaction in the workplace. This section of the paper is predicated on the

heavily researched hypothesis that motivated employees are satisfied employees. The job

76


of a manager in the workplace is to get things done through employees. To do this the

manager should be able to motivate employees. This having been said, actual employee

motivation is not a simple proposition due to of all of the elements associated with

employee motivation theory (Accel 2006). Human nature can be very simple, yet very

complex too. An understanding and appreciation of this is a prerequisite to effective

employee motivation in the workplace and therefore, effective management and

leadership.

Figure 7: Employee Motivation

77


Source: Accel Team

In order to maximize productivity and efficiency in the workplace, employees must be

motivated. When employees feel motivated they are more creative, more efficient, and

most importantly, satisfied with their work and the organization that they work for (Fig.

7).

The theory of motivation is really rooted in the field of psychology. Because of this, one

can infer that motivation is unique to the particular individual, affected by different

circumstances. “Motivation is the set of processes that moves a person toward a goal. The

purpose of behavior is to satisfy needs. A need is anything that is required, desired, or

useful. A want is a conscious recognition of a need. A need arises when there is a

difference in self-concept (the way I see myself) and perception (the way I see the world

around me)” (Allen 1998). Although there are several cited motivation theories, two of

the more popular will be discussed here: Maslow’s Hierarchy of Needs, which has

previously been mentioned in this paper, and Herzberg’s Two-Factor Theory (Fig. 8).

Work motivation is one of the key areas of organizational psychology. Using these two

different motivational theories, this paper will analyze the motivation triggers used to

maximize employee motivation and satisfaction.

78


Figure 8: Motivational Theories

Source: Gemmy Allen

Frederick Herzberg developed a two-factor theory of motivation that makes clear what

the employer can bring to the motivation partnership. According to Herzberg, two factors

affect employee motivation: dissatisfiers (sometimes referred to as Hygiene) and

motivators. While at work, the organization is in control of both factors (Erven and

Milligan 2001). Dissatisfaction (hygiene) or extrinsic factors, excessive hours, unsafe

working conditions, job security, and low wages, produce job dissatisfaction. Motivator

or intrinsic factors, such as increased responsibility, adequate training and development

opportunities, recognition, and satisfying work, produce job satisfaction (Fig.9).

Figure 9: Motivation & Satisfaction Levels

79


Source: Ohio State University

The implications for the employer’s side of the motivation partnership are clear. The

dissatisfiers must be removed before motivators can work. Employees working in unsafe

conditions with unfair pay will not be motivated by recognition and delegation of

additional responsibility. However, if improvements in both safety and pay are made,

employees may still not become motivated. Instead, if all else remains the same the

employees will become satisfied but not motivated (Erven and Milligan 2001).

The second of the two psychological theories of motivation, and probably the most

widely recognized, was first introduced by Abraham Maslow and is known as Maslow’s

Hierarchy of Needs.

Figure 10: Maslow’s Hierarchy of Needs (illustration)

80


Source: Gemmy Allen

Maslow’s Hierarchy of Needs identifies five levels of needs, which are best seen as a

hierarchy with the most basic need emerging first and the most sophisticated need last

(Fig. 10). People move up the hierarchy one level at a time. Gratified needs lose their

strength and the next level of needs is activated. As basic or lower-level needs are

satisfied, higher level needs become operative. Therefore, a satisfied need is not a

motivator (Allen 1998). The basic human needs, according to Maslow are: physiological

needs (lowest), safety needs, love needs, esteem needs, and self-actualization needs

(highest). This theory indicates that man’s behavior is therefore dominated by his

unsatisfied needs. As each need is satisfied, another is created, making the cycle a

perpetual, ongoing activity of searching for perfection through self-development (Accel

2006).

81


Motivating employees is a constant task that requires an understanding of employee

psychology, as well as an understanding of individual motivators. The key to motivation

unlocks human potential. To be effective, managers need to understand what motivates

employees within the context of the roles they perform. Of all the functions a manager

performs, employee motivation is one of the most complex management issues they face.

As employees find an outlet for their creativity and satisfaction with their work, the work

they perform becomes a more important part of their life. As a result, employees become

more productive and experience higher rates of satisfaction with their employment

(Erven and Milligan 2001). In the past, managers assumed incorrectly, that all it would

take to motivate employees is to pay them more. It is conceivable for an organization to

have more employees than a competitor yet produce less and have disgruntled, low-

output employees even though the organization is paying their employees more than the

competitor. The research has clearly shown that increased motivation and satisfaction can

increase worker output. Organizations are beginning to understand that they are able to

motivate increased productivity and employee satisfaction by means other than financial

incentives (Increasing Productivity 2005).

The foundation of good human relations, the interaction between employer and

employees and their attitudes toward one another, is a satisfied work force. Job

satisfaction is the degree of enjoyment that people derive from performing their jobs.

Satisfied and motivated employees are more likely to have high morale, loyalty and

commitment. As a result, they tend to be more dedicated and make larger contributions to

the initiatives and goals of the organization (Allen 1998). An organization’s level of

82


understanding of how to motivate its employees can be considered directly related to the

level of productivity and employee satisfaction realized at the organization.

Chapter 3

Increased Employee Satisfaction Leads to Increased Creativity and Innovation

One of the more beneficial results of increased employee satisfaction is the potential for

employees to exhibit more creativity and innovation. It has been found that increased

levels of creativity and innovation in employees have a positive effect on the corporate

profitability of an organization. It is important to note however, that creativity and

innovation are positive by-products of satisfied employees, therefore making it important

for management to focus on the previously discussed elements of employee satisfaction.

This section will consider the important elements and factors typically associated with

employee idea creation and innovation, as well as give examples from one of the most

innovative companies in the world, Apple Computer Corporation.

The term creativity has many different definitions, depending on the context in which it is

used. However, a commonly accepted definition of the word is: inventing something

new, or previously unconsidered. The generally accepted definition of innovation is:

making changes to, or modifying something that is existing or established. “Innovation

must add value either through a new product, a new process, a new market for an existing

product, and so forth” (Pech 2003). Both creativity and innovation have played major

roles in the success of many companies around the world. This happens when an

83


organization’s employees are put in the position of being able to “think outside of the

box” or encouraged by management to find better ways of doing things.

Organizations are learning that their employees are a great source of previously untapped

knowledge and potential solutions to problems. Learning organizations find ways to

encourage their employees to openly think about new processes by challenging the old

ones. A common practice in companies today is the use of “brainstorming” as a tool by

which to collectively create new ideas and perspectives. Brainstorming occurs when a

group of people in the same forum, offer ideas and suggestions without much

forethought. Everyone is encouraged to offer as many ideas as possible without fear of

retribution, and with the understanding that no idea is too ridiculous for consideration.

After the initial session, the members of the group go back to all of the ideas and evaluate

them in more depth and detail. Surprisingly, many great ideas and new innovations have

been spawned using brainstorming sessions.

More and more organizations are realizing that innovation will be the key to future

success for them. According to one of the world’s foremost authorities on innovation, Dr.

W. Edwards Deming, “Innovation, the foundation of the future, cannot thrive unless the

top management has declared an unshakeable commitment to it” (Deming 1986).

Organizations that have satisfied the basic needs of their employees, then allow them the

freedom and latitude to me creative and innovative, are quite often times the beneficiaries

of profitable results. Companies such as Apple Computer Corporation, 3M, and IBM

have built massive global businesses on the abilities of their employees to be creative and

84


innovative. It is important to note that innovation and creativity can be actively

discouraged by the management of an organization, just as they can easily be encouraged

as well.

Innovation Process Examples to Learn From

The following examples stem from issues that were faced by the 101st Air Lift Wing

located at the Bangor International Airport, in Bangor, Maine. The first issue is in regard

to the desire for a flexible cup holder to be installed in the cockpit of the Wing’s KC-135

Stratotanker airplanes. Because of the increasing amount of hours the pilots were being

asked to fly, as well as the need for them to have to use both of their hands, it was

decided that cup holders should be installed in the cockpit’s of the aircraft. Rather than

ask the pilots, crew chiefs, or maintenance staff about a solution, the Commanders of the

base decided to retain an engineering firm from another state.

After spending more than six months and more than $100,000 for a design-build solution,

the engineering firm came back to the Commanders of the Squadron with a $1,000,000

proposal for a complex cup holder that contained a computerized gyro. In addition to the

exorbitant costs, this solution would have taken more than eighteen months to implement.

It was eventually decided that due to the costs and time requirements that nothing could

be done to address the problem at the time. Therefore, the engineering firm was paid their

$100,000 for the design and the project was terminated.

85


Shortly thereafter, a group of pilots was sitting at lunch discussing the issue. Each would

offer an idea that was subsequently written down by one of their counterparts. After an

hour, and more than fifty viable ideas, the pilots began to analyze each idea on its merits.

In the end, a viable solution was found. One of the pilots had a boat with cup holders in

it. The line of thinking was that an airplane has similar motion to a boat most of the time.

In the end, cup holders with swivels were purchased from a local boat dealer for less than

$5 a piece and subsequently installed on all of the aircraft. This is a good example of

informal brainstorming producing an innovative idea that proved to be both efficient and

cost effective for an organization.

Another example from the 101st did not have the same results, but should serve as a

learning tool for organization’s that attempt to introduce idea creation and innovation

initiatives into their culture. In this case, The Logistics Squadron had been experiencing

issues with the scheduling and movement of certain aircraft maintenance kits used for

deployment activities. In an effort to find a suitable solution to the issue, a Process Action

Team (PAT) was formed and a schedule of meeting times was set. The members of the

team were a cross sectional representation from many other organizations on the base,

including the Wing Commander, a Brigadier General.

In the first meeting the issue was discussed and it was decided that the group should

engage in a brainstorming session to introduce alternative ideas and solutions to the

problem. As the brainstorming began, group members would make their comments as

someone wrote them down in front of the group. In a short period of time, the General

86


began making disparaging remarks about the ideas that were offered. This quickly

resulted in members of the group becoming silent and unwilling to offer any further

ideas. In the end, because the process was not supported and encouraged at the top, the

initiative was left unresolved. The group was disbanded and the problem persisted

without resolution

Suggestions for Improving the Innovation Process

The previous two examples highlight the importance and necessity for management to

encourage employees to be innovative and creative. “Creativity is most likely to occur

when people have the freedom to pursue their ideas, and this pursuit must be

accompanied by the encouragement of management and the support of the corporate

culture in which it operates” (Gryskiewicz 1999). For this reason, organization’s that seek

to enhance the creative and innovative thinking of their employees must show public

support for the idea and take steps to actively encourage employee creativity and

innovation. Because of the success and terrific example of employee creativity and

innovation at Apple Computer, the next section will highlight some of the initiatives at

the company.

Apple: An Example of Creativity and Innovation

It is no secret to most people on the planet that Apple Computer Corporation is very

successful and known for their many innovative products. The creativity and innovation

that the company is known for however, did not occur by accident or happenstance. It

87


was however, because of corporate leadership that understood the value and benefits that

could be derived by encouraging employees to be creative and innovative. Apple has not

always been successful, and in fact was close to insolvency before Steve Jobs was

appointed Interim CEO in 1998. At the time Jobs rejoined the company in 1998 the stock

price was $13 per share and just two short years later, it was $118 per share.

Understanding that innovative products and services were the key to building Apple,

Steve Jobs said in 1998, “the cure for Apple is not cost-cutting. The cure for Apple is to

innovate its way out of its current predicament” (Linzmayer 1999).

Due to the belief that innovation and creativity are the foundation of success, the

Executive Management team at Apple takes many proactive steps to ensure the

innovation and creativity are encouraged. The process at Apple begins with the hiring

process. Apple has access to some of the brightest minds in the technology industry, but

the company is seeking creative and innovative people as well as just smart people. Once

the innovative employees have been hired, Apple has many incentive and reward

programs in place that encourage and foster an atmosphere conducive to entrepreneurial

behavior.

From the invention of the iMac computer, to the invention of the iPod, and now to

innovations like iTunes, Apple can thank their encouragement of creativity and

innovation. Other, newer high tech companies are examining the successes at Apple and

adopting many of the innovation strategies that made Apple such a success. One of these

companies is Google. “The similarities between the two are striking, to say the least. The

88


game is changing. It isn’t just about math and science anymore. It’s about creativity,

imagination, and above all, innovation” (Berner and Brady 2005). Apple should serve as

a good example of the benefits that can be derived from an organization that actively

encourages its employees to be creative and innovative.

Chapter 4

Customer Service, Loyalty, and Retention

The first part of this paper concentrated on the “employee satisfaction” element of the

Service-Profit Chain. The paper will now consider the elements of “Customer

Satisfaction.” Obviously, continued commerce requires a customer in order to maintain a

perpetual business cycle. A customer is the conduit between the employee and any profit

potential that an organization may realize. It is now widely accepted that profitable

customer experiences are no longer transaction based, but rather relationship based. For

an organization to maximize the Service-Profit chain strategy, they must not only

concentrate on employee satisfaction, but they must also become “customer-centric.”

Being truly customer-centric requires that everyone in the organization be aligned to have

contact, or the opportunity to affect customers (Mitchell 2003).

The topic of customer satisfaction/retention has grown immensely in recent history. It is

not enough anymore for an organization to just provide good customer service; they must

ensure that they are engendering customer loyalty. At the heart of customer-centricity is

the concept of the customer value equation. “This equation suggests that the value of

goods and services delivered to customers is equivalent to the results created for them as

89


well as the quality of the processes used to deliver the results, all in relation to the price

of a service to the customer and other costs incurred by the customer in the acquiring the

service” (Heskett, Sasser, and Schlesinger 1997). This relationship will be the basis for

the analysis presented in the next section of this paper. The elements of customer

satisfaction, retention, and loyalty will be analyzed comprehensively in order to better

understand their impact on employee satisfaction and corporate profitability. Many

elements of customer service will be considered, as well as several concepts regarding

customer loyalty and retention. Evidence will be presented to support the hypothesis that

loyal customers effect employee satisfaction and contribute to corporate profitability.

The Customer-Centric Organization

Market conditions are driving organizations to become more customer-centric. In order to

provide the best possible customer service experience possible and differentiate one’s self

from the competition, organizations are beginning to transition from being product-

centric to being customer-centric (IBM 2006). Organizations are realizing that the

common denominator between product or service delivery and corporate profitability is

the customer. Because of this, many organizations are redesigning their current business

strategies around the customer-centric philosophy. Organizations are recognizing that just

like employees, inventory, or cash, customers are a valuable asset that should be managed

accordingly. Not only do customers generate revenue for an organization, what they say

and how they feel can influence future revenue. Customer-centric organizations listen to

their customers and react accordingly. They view their business strategy from the point of

90


view of the customer, and thus reduce expenditures on unwanted processes, and at the

same time create new business opportunities as a result of customer feedback.

The definition of a ‘customer-centric’ organization is: an organization that defines,

markets and sells its products and services from the customers’ point of view. The term

itself has become overused, as many organizations say they are customer-centric, but few

really are. It is important for organizations that claim to be customer-centric to deliver on

the proclamation or risk alienating customers who rely on the statement. If customers

have a reasonable expectation that they will be the focus of the organization, it is

imperative that they are. Organizations that fail to deliver on the promise of focusing on

the customer, often suffer the consequences in the form of economic loss (Gomolski

2005). Becoming customer-centric involves many of the elements that this paper will

now consider such as: branding, marketing, service, measurement, and customer service

management (CSM) programs. Actually becoming a customer focused and driven

organization requires more than just deciding it is a good idea in order to boost sales. As

the analysis in this paper will show, becoming a real customer focused organization

requires dedication, time, commitment, and a great deal of effort.

In their quests to become customer-centric, organizations must consider that it is not

enough just to take care of the customer today, they must think beyond today and plan for

what the customer will desire tomorrow. Organizations must do more than anticipate

customers’ stated needs. They need to go beyond stated needs and become proficient at

anticipating unarticulated needs and desires (Hamel and Prahalad 1994). This is not

91


always an easy thing to do, especially when technology is involved. However,

organizations that make the investment required to change their whole way of thinking

often find that the process is made easier. At the heart of becoming a true customer-

centric organization is the ability to create value for the customer whenever they come

into contact with an organization. “What drives this new model is not profit but the

creation of value for the customer, a process that lies at the core of all successful

enterprises. Value creation generates the energy that holds these businesses together, and

their very existence depends on it” (Reichheld 1996).

Organization’s that become ‘customer-centric’ understand that their business is no longer

about the product or service that they once provided; it is now about the customer that

uses the product or service provided by the organization. Customers don’t buy products

or services; they buy results. The attitudes and quality of the service provided to

customers is an important consideration (Heskett, Sasser, and Schlesinger). Customer-

centric organizations ask questions differently. Their values, mission, and organizational

structures exist for the customer, not the organization or its owners.

Customer Acquisition – Branding & Marketing

Customer acquisition and branding are also important elements of the ability of an

organization to attract and retain customers. This is important for several reasons that

include acquisition expense, the message being sent to potential customers, and the

ability of the brand to attract customers. Organization’s need to consider whether they

92


will advertise themselves as lowest cost, highest quality, or having the best possible

service available. All of these considerations play into the ability of an organization to

attract new customers and then keep them.

The way organizations make themselves known to potential customers is by creating a

brand. A brand is an asset and should be marketed and accounted for accordingly. A

strong brand is highly recognized and in many cases, specifically sought after by

consumers. Some brands such as Coke and FedEx are even used to describe a whole line

of products in a certain market segment. Although this is an unrealistic expectation for

most companies, they should still be aware that a brand is what identifies an organization

to customers. Brands over time are able to engender customer loyalty. Consumers that are

loyal to brands seek out and will only purchase those brands, no matter what the cost

(Kaplan and Norton 1996).

Organizations should design identifiable brands that a diversified customer base will

recognize and find attractive. Developing a strong brand not only creates loyal customers,

but also gives an organization better pricing power and economies of scale when

advertising. The goal of an effective brand should be to become synonymous with the

products and services of the organization. Good brands receive word of mouth

advertising and strong consumer recognition. Brands should be treated as assets and

accounted for accordingly. Because good brands can distinguish an organization from its

competition, protecting and strengthening them should be a priority.

93


Customer Acquisition and the Internet

One of the major changes in marketing for customer acquisition in recent years has been

the proliferation of the Internet. Many customers only shop online, and the numbers are

growing exponentially every year. For this reason, customer acquisition and marketing

via the Internet deserves a more in-depth analysis. Once a company makes the decision to

enter into an e-commerce strategy, the implementation of this strategy is only the first

step. When an organization does decide to attract customers online, it must take the steps

necessary to identify whom it is they will conduct business with online, how they will

attract that business, identify who their customers are, and identify ways to keep their

customers. In short, the Company must develop an Online Marketing strategy.

Sometimes attracting customers in an online environment can be more difficult than

drawing them into a traditional customer – business interaction. However, there is now a

much larger pool of potential customers from which to draw. Once a definitive marketing

strategy has been developed, the organization will be able to better identify, attract and

keep the new customers they attract to their website.

Internet marketing is not just comprised of a website presence online; it is a discipline

that requires several steps in order to be successful. As organization’s attempt to develop

marketing strategies, they must consider the intended audience that they are seeking to

have as customers. Being able to identify and understand potential customers is a very

important consideration for Internet marketing (Warholic 2005). Even though the Internet

can seem like an endless number of customer prospects, it is just as important to identify

who the target customer is as it is in a traditional marketing environment. Firms must

94


understand that e-commerce isn’t strictly a numbers game; it’s a people-serving activity.

“To be successful at e-commerce marketing you need to see the vast number of people on

the Internet as real individuals, each with needs, desires, and preferences” (ISM 2006). It

is important and invaluable to understand the customer in order to be an effective

marketer. It is also important to target the customer. Without this understanding and

failing to have a targeted marketing plan geared toward the customer, the probability of

failure exists in an online environment.

Business-to-business (B2B) e-commerce – the area that encompasses electronic buying

and selling transactions between organizations, has become central to doing business

effectively. If B2B strategies are well developed and executed, they can provide an

organization with improvements in productivity and cost savings (Neef 2001). According

to the latest statistics compiled by the U.S. Department of Commerce, B2B activity

accounted for the majority of all e-commerce (93%). Customer acquisition, sales, brand

awareness, and customer retention will need to be a major focus of the firm’s marketing

plan. B2B marketing must be concise and task specific to the potential customer.

Efficiency and speed must be highlighted as benefits of using a specific organization’s

B2B platform, rather than that of a competitor. Targeting B2B customers means that an

organization is marketing to the busy employees of other companies. It is important not

to inundate them with elaborate messages and flashy branding graphics (McHale 2002).

Effective B2B marketing messages should resonate a feeling of ease, expediency, choice,

and security. In the end, it is the relevance of a site’s content to its business audience that

drives adoption and usage from that audience.

95


The more a company can offer to a potential business customer, the more attractive the

product or service. Once a relationship is established, both companies can benefit from

shared information and economies of scale. Many business-to-business relationships

evolve into strategic partnerships between organizations. These relationships entail very

high levels of information sharing, strategic planning, and unprecedented communication

(Greenberg and Greenberg 2006). The relationship often evolves into strategic alliances

between business partners. Before this can happen, the potential business customer must

be able to see the advantages of doing business with an online platform. In order to be

effective and relevant to the business audience, B2B marketing efforts should be targeted.

A major factor to the success of B2B commerce solutions is the ability of an organization

to understand fully to whom they are marketing, and what it is they are able to provide in

terms of added value for the customer (Horn 2005). This highlights the importance of an

effective online marketing strategy that will accurately depict and describe the B2B

solutions that an organization has to offer.

Business-to-consumer (B2C) electronic commerce is a form of electronic commerce in

which products or services are sold from a firm to a consumer, as opposed to a business.

An organization’s goal should be to grow its online business platform and be able to offer

expanded products and services to its customers via the Internet. The average online

customer today is not what they used to be. They are more educated, savvy, and

searching for pertinent information. “To succeed in this environment, companies must

recognize that the growth of the channel is coming from the mainstream consumer, and

that this shopper has different expectations and priorities than the early adopter” (Levitan

96


2001). An effective online marketing strategy must emphasize the ability to respond and

adapt to rapidly shifting consumer expectations.

Successful consumer focused e-commerce requires that attention still be focused on the

service aspect of the transaction. Although the transaction may take place in an online

environment, the individual consumer will still require that a level of perceived service

be delivered. Conventional as well as B2C services face challenges of

maintaining high service quality. A McKinsey study of best practices of successful e-

business firms (2001) found that successful companies consciously or unconsciously saw

themselves as service companies and took pains to find out and deliver what their

customers wanted (Dholakia and Pandya 2002).

A prerequisite for attracting potential customers to an organization’s website is having an

effective communication strategy in place to attract potential customers to the site

(Chaffey 2002). The two different techniques used to accomplish this can be

characterized as traditional offline marketing communications or new online

communications. Offline marketing is attracting potential customers to the website using

means other than online advertising or marketing. This is typically achieved through

using traditional print, radio, and television media for the purpose of driving offline

business online. Online communication strategies can take many different forms and be

delivered differently. Many online advertising strategies incorporate some or all of the

following in order to attract customers: Internet market research, e-mail marketing,

promotion and e-business advertising, banner ads, and search engines. This is by no

means a comprehensive list, but a compilation of the most frequently used.

97


Target Marketing

Customer acquisition is only the first step to customer retention and loyalty, but an

obviously important step for the customer relationship with an organization on the whole

(Fig 11).

Figure 11: Customer Acquisition/Experience Model

Source: Suzanne Taylor

Targeted marketing is a critical component of any marketing success. Attracting and

retaining profitable customers and turning potential customers into actual customers can

prove to be a huge challenge. “By understanding the demographic characteristics,

lifestyle behaviors and purchase preferences that drive your audience’s, you can

successfully tailor your marketing strategies to reach those most likely to purchase your

product or service, increase your customer loyalty and improve customer profitability”

98


(Claritas 2006). The marketing concept teaches us that we’re all in the business of

acquiring new customers and retaining existing ones, and that success in business is

largely the measure of our ability to carry out these functions effectively. Every

organization should develop a marketing mission with the end goal of acquiring and

retaining new customers (Falkson 2004). As a result, the marketing of a company’s

product or service is imperative to new customer acquisition, and subsequent customer

retention.

Adding to the practice of treating potential customers as being more than just one-time

events is the consideration of the customer’s life cycle. Customers are rightfully regarded

as markets. But this is a gross definition. A more appropriate definition may be to

consider the customers’ life-cycle events as the markets themselves. This is where the

opportunity to grow customers will be found (Hanan 1987). An organization should

begin by developing a strategy for both the customer base and the potential target market

segment to identify the highest value customer segments and best customer acquisition

opportunities. The link between internal data and marketplace indicators provides

powerful information in regard to possible purchasing preferences. The result of the

information derived from this link helps to reveal which products and services certain

customers are likely to want (Claritas 2006). To better illustrate the importance of

understanding the value of a potential customer’s purchasing behavior, consider the

following example: In 2003, the annual expenditure of an average new customer was

$250.00. That same customer spent $500 in 2004 and $1,000 in 2005. Therefore, the life-

cycle value (assuming a 3 year retention rate) would have been $1,750.00 per customer.

99


Assuming an organization had 1,000 new customers in 2003, and a life-cycle value of

$1,750 per customer, this translates into $1,750,000 in sales over the three years.

As previously identified, the key to effective customer acquisition is having a defined

market for an organization’s product or service. A problem that many organizations

encounter is a market that is too broadly defined. In this case, the organization will

realize higher advertising and marketing costs which result in lost opportunities that even

a fully integrated marketing campaign can’t rectify (Gartner 2005). The key for an

organization is to properly define the potential customer, then market to them with the

long-term benefits in mind. The importance of measuring the long-term effects of

marketing has been emphasized by managers and academics alike. Managers should

refrain from the propensity to focus on short-term profitability initiatives at the expense

of long-term profitability (Villanueva et al. 2006). It is imperative that organizations

overcome this tendency when marketing for customer acquisition.

The process of customer acquisition is an important step in cultivating a loyal customer

base. It is also an expensive business function that must show a payback in the form of

added revenues for an organization. Marketing investments need to show demonstrable

impact on revenue. This has caused marketing professionals to seek new ways to grow

their customer bases that include lead acquisition, message communication, and

appropriate target market identification (Sutker 2006). Despite the costs of doing so,

acquiring new customers is the lifeblood of any organization or business. An organization

should ensure that this initiative is part of their current marketing plan and ensure that it

100


is a primary initiative. Keeping an eye on new customer acquisition trends is essential for

keeping an organization’s finger on the pulse of its business. This is important because

customer acquisition initiatives are the most expensive part of an organization’s

marketing efforts. (Waugh 2000).

Successful organizations are rethinking the way they advertise and market to their

potential customer base. Instead of viewing a customer as a one-time transaction, they are

instead taking the long-term outlook and viewing the potential customer as a lifelong

event. Service-profit chain management is changing the face of marketing. “Market share

quality, defined primarily in terms of the share of loyal customers served, is becoming the

primary goal instead of simply having the largest market share” (Heskett, Sasser and

Schlesinger 1997).

Delivering World-Class Customer Service

Once an organization has been able to acquire a customer, they must do whatever it takes

to keep them as a repetitive customer. Because so many products have become

commodities, and because competition has become so fierce globally, companies need a

way to set themselves apart from the competition. The best way to accomplish this is

through delivering great and memorable customer service. Most customers exhibit

similar traits and qualities – they are self-absorbed, they expect organizations to meet

their needs immediately, and to attend to their every need with a smile. Customers do not

care about other priorities employees may have. They expect to be the employee’s

priority and be attended to when they are ready (Evenson 2000). Because customer

101


service is such an integral part of customer retention and loyalty, this paper will devote a

great deal of time and analysis to the topic. Providing superior customer service is just

good business, and may be the only thing that sets an organization apart from the

competition.

The lack of appropriate service is one of the most common complaints of all consumers.

The simple fact is that most of our service businesses don’t serve very well. Many

businesses are renowned for their lack of service, although they are in service providing

businesses. Some examples include airlines that are constantly overbooked and lose

luggage, restaurants that employ poorly trained people, and hospitals that employ nurses

too overworked to provide attentive service. Because these situations are so

commonplace, many consumers do not even recognize these lapses in proper service

delivery when they happen (Senge 1990). Customer service is one of those often-talked

about and promoted issues, but rarely delivered in a consistent fashion. “Successful

organizations have one common central focus: customers. It doesn’t matter if it’s a

business, a professional practice, a hospital, or a government agency, success comes to

those, and only those, who are obsessed with looking after customers”(Blanchard and

Bowles 1993). Walls throughout corporate America are plastered with mission, vision,

and values statements that state how important customer service is. It is not enough to

talk about customer service; it must be delivered time and time again.

Customer Expectations

102


Customers everywhere have some common expectations when they are engaged in a

purchasing situation. The following list is by no means comprehensive, but yet has

universal applicability:

Value

“I want to know that what I am buying is at a fair price, and will be supported throughout the length of my ownership.”

Communication

“Let me know what I need to know, when I need to know it.”

Attitude

“Happy, eager, willing… prepared to meet my needs.”

Reliability

“Consistent… be there when I need you.”

Tangibility

“Quality of product and performance… professional image

Assurance

“Deliver when you promised… total product knowledge.”

Empathy

“Understand me and my needs. Give me your commitment.”

Exceptional Service

“I vote with my money, and an election is held every time I want to re-order or tell a friend” (Gitomer, 1998).

This paper has already discussed the fact that consistency is the key to building a repeat

customer base that will provide economic benefit to an organization into the future.

Consistency is especially important for organizations with more than one location.

103


Standardization of service has become an expectation of customers. Multisite services

likely to be accessed at more than one location present a strong case for standardization,

especially in the quality of products and services delivered. This is especially true for

personal services. For example, the Holiday Inn chain of hotels has used standardization

as a major theme in its marketing programs to frequent travelers who appreciate

consistency away from home (Heskett, Sasser, and Schlesinger 1997). Some customers

may forgive inconsistent service, but most will not.

Many times customer expectations are set by the organization, not the customer. This is

done through advertising and marketing certain promises or results. The key for an

organization is to promise reality and refrain from instilling unrealistic expectations in

customers. The messages that are contained in advertising communications are almost

always crafted with the objective of driving customers to a business – and most often

they’re targeted toward new customers. But these communications can sometimes do

long-term damage if they set unrealistic or inappropriate expectations. These messages

may serve to attract customers to the business, but in doing so, they may serve to

disappoint and undermine the ability of the organization to meet the customer’s

expectations (Colombo 2003). Most customers do not expect perfection anyway; they are

quite satisfied with goods and services that perform adequately. Yet there is now an

advertising campaign from a hotel company promising that a stay with them will be

‘perfect.’ This establishes an unrealistic expectation in the customer’s mind for a level of

service that in the long run is impossible to attain (Francese 2002).

104


Advances in technology and a recent focus by organizations on customer service have led

to ever increasing customer expectations. Successful service efforts of the past contribute

to customers’ attitudes, raising their expectations with each new technology, and each

new approach. Customers’ expectations continue to rise as every business strives to

surprise and delight their customers. As a result, customers are predisposed to look for

bigger and better service delivery from organizations. If these ever-rising expectations are

not met, customers then defect to a competitor (Colombo 2003). This is a difficult

situation for organizations to manage, as often it is out of their direct control.

Expectations are constantly evolving because improvements in service shift customer

demands. While customers initially appreciate better services, they quickly get used to,

expect and demand them. This does not mean that companies should slow their attempt to

deliver ever better service that leads to rising customer expectations. Customers judge

customer service levels and service delivery by comparing different experiences at

different organizations, not just one (Cleveland 2003).

Unfortunately, customer expectations are often not set based on your organization, but

are judged against the best organizations in the world. Customers do not do this on

purpose, with high expectations in mind, but rather because they have been conditioned

to do this based on their many associated experiences (Hitt 2003). This is where

understanding the customer can lead to a set of realistic customer service expectations.

When a customer is engaged in your organization, it is imperative to completely

understand his/her wants, needs and expectations. This will better allow you to deliver

105


the expected product or service in a manner consistent with the expectations of the

customer.

The “Internet” effect has been discussed in this paper on several occasions. Even so, it

must be discussed here again because of the overwhelming effect that the Internet has had

on customer expectations and service. As new technologies and channels for

communication become established, distance is eliminated or minimized, and information

is often available immediately. Today’s consumers are the beneficiaries (and sometimes

victims) of the information explosion. There are volumes of information available to

consumers on the Internet and it is able to be delivered at warp speed (Duncan-Poitier

2001). This speed and access to technology has created an expectation in consumers that

all of their transactions be completed in record time and with minimal complication.

Evolving customer expectations present an enormous opportunity for organizations to

differentiate services. The uncertain economy and incessant customer demands have put

the spotlight on what organizations everywhere must deliver. Rather than being a

negative, this can provide tremendous opportunities for organizations with adept

leadership and solid management (Cleveland 2003). Managing customer expectations is

as much an internal marketing matter as an external one; although there is no doubt that

external pressures exist. “Fostering an internal culture of constant incremental

improvement almost guarantees that the level of customer satisfaction will rise. The idea

is to set and achieve some measure of service quality internally before promising it to

customers” (Francese 2002).

106


Customer expectations should be addressed in an organization’s strategic business plan,

and should include and be driven by business goals that allows them to be more

responsive to customer expectations. A comprehensive customer service strategy should

include metrics that proactively address the issue of customer expectations, to include an

ongoing review of their effectiveness. To be successful today, organizations must go

beyond just meeting customer expectations and work to exceed expectations.

Organizations that take an approach to exceeding customer expectations focus on

defining and executing very specific, proactive customer service strategies. Organizations

that exhibit customer responsiveness focus on service metrics that are driven by business

goals (Tambellini and Liu 2005). Exceeding customer expectations requires extensive

planning and implementation of customer service strategies across all levels of the

organization.

An organization that is able to constantly and accurately identify customer expectations

will be in a more competitive position to gain and retain customers. No matter what the

business is, customer’s expectations will rise over time. The expected speed at which

products will be delivered, for example, is much shorter today than it was ten years ago.

In order to stay competitive, organizations must understand and keep up with customer

expectations. However, organizations walk a fine line in trying not to get too far out in

front of what customers expect (Francese 2002). Successful organizations will have to

become adept at coping with change. Effective organizations are flexible and able to

evolve as necessary. These organizations are able to interface with customers differently,

107


manage customer relationships more dynamically, and adjust staffing as needed for the

purpose of meeting changing customer expectations (Colombo 2006).

An organization does not have to rely on intuition alone, as there are ways to elicit

customer expectations directly from the customer. There are many ways to do this that

include: customer surveys, focus groups, polling, and secret shopper programs. Employee

customer training, that is the focus of the next section of this paper, can be used to

effectively help employees understand and identify customer expectations. Spending

money and time on employee training is always a good investment, but it becomes an

even better investment when it is combined with an ongoing program that measures how

an organization’s customer’s level of satisfaction has improved, if it has. One of the

better tools to assess whether or not an organization is meeting or exceeding its

customers’ expectations is the customer survey (Francese 2002). Organizations need to

assure that if they are using customer satisfaction surveys they are worded correctly and

elicit an actionable response from the customer.

An issue to be considered when using customer satisfaction surveys is that there may not

be a direct correlation to the results shown on the surveys and actual effects on customer

service. Satisfaction surveys are a far less accurate test of satisfaction than behavior. “In

business after business, research has shown that 60 to 80 percent of customers who

defected from an organization had said on a survey just prior to defecting that they were

satisfied or very satisfied” (Reichheld 1996). This has caused many organizations to

respond with different, more highly technological approaches to gauging customer

108


expectations and satisfaction. Although many organizations have invested a great deal of

time and money in more technologically advanced customer feedback systems, the results

are still rather dismal in reality. A good example of this exists within the auto industry.

Although 90 percent of automobile customers claim to be satisfied, only 40 percent come

back for another purchase.

The obvious goal of an organization is to receive valuable and actionable feedback from

the customer so that expectations can be met in the future. Another way that this can be

accomplished is when a customer complains about an element of service or the

experience they are dissatisfied with. This is not as easy as it may seem either because of

the psychology of the customer that is at play. A study of customer behavior conducted

by the Technical Assistance Research Programs Institute (TARP) for the U.S. Office of

Consumer Affairs has been quoted so often that its impact has been blown out of

proportion to the research and its findings. The results of the TARP researchers

concluded, that in many cases, customers don’t register their dissatisfaction with products

or services because it requires too much effort for too little potential payoff (Heskett,

Sasser and Schlesinger 1997). In order to overcome this type of thinking, organizations

must create an easy to use, welcoming method for customers to express their

dissatisfaction with the products or services provided by the organization.

Although customer satisfaction polling has its flaws, it is still a large industry and a very

widely used technique by many organizations around the world. Customer satisfaction

surveys have now become one of the most active areas for market research firms, with

109


current billings of nearly $200 million and annual growth of 25%. These specialized

services may consist of elements concerned with consumer psychology, market research,

statistical data, and interviewing techniques (Kaplan and Norton 1996). As long as

organizations are able to translate the results of customer satisfaction surveys into

measurable results and customer retention, they should continue to use customer

satisfaction surveys to measure, at least to some degree, customer expectations.

Training for Customer Service

In order for organizations to realize the best possible interaction between their employees

and the customer, they must ensure that employees are trained adequately in customer

service, and also be empowered to make decisions that enhance customer service.

Customers will continue to show strong favoritism to organizations that offer personal,

custom, ‘just-for-you’ service, whether using the technology of the Internet or in face-to-

face transactions. Customers expect to have issues resolved by contacting an empowered

employee who will follow through appropriately. The more customer expectations

increase, the more expedient customers require their issues to be dealt with. Because of

this, employees are increasingly having to deal with hostile and angry customers and will

be required to have the skills and abilities necessary to deal with them (Colombo 2006).

Providing well-trained and informed employees continues to challenge many

organizations. With multiple channels of contact and better-informed consumers, this is

as important as ever.

110


Identifying high-impact behaviors that can positively affect customer service is critical to

the customer service function. However, this is not enough; these behaviors must be

constantly trained and reinforced to ensure the desired results. In service-successful

organizations, training and development of employees is a never-ending process. It starts

on an employee’s first day on the job and continues until the gold watch is presented. It

includes formal and on-the-job training, guided experience, effective coaching, targeted

performance review, and strong support for learning from the organization as a whole.

Organizations must pursue the development of their employees at all costs. If businesses

fail at preparing their employees to deliver proper customer service, the employees will

not be prepared to meet ever-increasing levels of service quality (Connellan and Zemke

1993). Customer service training must be integrated into the overall training plan of the

organization.

Although there are certain employees that exhibit innate traits that are beneficial to

providing great customer service such as a great smile, an empathetic attitude, or having a

positive attitude, there is no substitute for continued customer service training. Another

issue that is important for organizations to keep in mind is that customer service training

should be provided to everyone in the organization, regardless of their position. A big

mistake that many companies make is training only a small percentage of their staff,

usually those who work directly with the customers, such as the customer service

department. Doing so is ineffective and dangerous because it promotes the message that

customer service is the specific responsibility of a limited group of people. Service needs

to be a way of life for everyone in the organization. Organizations that provide customer

111


training to all employees of the company, no matter what their position or title, send the

message to the employees of the organization that service is important and is the

responsibility of everyone (Leland and Bailey 2006).

Customer service training is as important as any other training. Many times it is assumed

that employees know how to provide excellent service. In actuality, some are better than

others, but all employees benefit from customer service training. Like all skills, customer

service improves with training and practice. Just like any other training for the job is

considered to provide “tools” necessary to perform effectively, so too is customer service

training. A company’s employees provide a window for the customer to look into its

organization. The big question is does the customer like what they see? Impressions are

powerful, and perceptions are reality, whether actually correct or not. For example, the

employee looks sharp, is pleasant, and meets all of the customer’s needs and

expectations, therefore this is a great organization and all of their employees must be like

this. The opposite can also be true. Employees with a bad professional image and that

convey negative attitudes leave customers dissatisfied and looking to other organizations

for satisfactory experiences (Colombo 2003).

Good customer service is not only geared to external customers but internal customers as

well. Learning how to communicate effectively, maintain a positive attitude in the face of

dissention, and proactively provide positive solutions to problems, are skills that will

enhance not only the external customers’ experience, but also lead to a more congenial

work environment. Organizations that are noted for their customer service view customer

112


service as an ongoing process that must be fully integrated into the maturation of any

employee in a comprehensive manner; as is the case with the Disney organization. The

characteristic that distinguishes companies like Disney isn’t found in the bits and pieces

of what it does, but in the thoroughness of what it does. When it comes to providing

customer service-training, quantity of training should not be confused with quality of

training. “Relevance counts as much, maybe more, than minutes. To be effective, training

should support serving customers better, working smarter, and creating a better outcome

for the organization” (Connellan and Zemke 1993).

Customer Service Training at the Disney Organization

The Disney organization is known around the world for providing excellent customer

service and catering to the needs and desires of its guests. This can be directly attributed

to the high level of customer service training that is received by every employee on a

constant basis. Employees at Disney are referred to as cast members, an indication that

they all play a role in providing the “Disney experience” to their customers/guests. All

new cast members at Disney parks, hotels, and resorts-regardless of level-begin with a

two-day orientation seminar called “Traditions.” The purpose of the seminar is twofold.

First, it provides cast members with a firm understanding of the Disney Corporation’s

traditions and values, and inculcates the Disney lore, language, and culture. Second, it

provides generic skills essential for job performance (Connellan and Zemke 1993). To

understand the Disney tradition, is to understand that customer service is paramount to

every employee and is the Disney way.

113


Service excellence, which it is referred to at Disney, begins with quality training. In fact,

screening for service-oriented employees begins even before the first interview at Disney.

Before “Casting” (the interview), potential employees are informed of the company

standards, policies, practices and expectations of its cast members. It is made quite clear

exactly what is expected of cast members, and what type of person would fit the part. The

next step involves a thorough orientation, a behind the scenes tour of the park, and

participation in a full-day training session at Disney University. This sets the tone for the

work environment, welcoming all potential cast members and stimulating passion for the

expected roles and responsibilities. Disney’s management believes that good customer

care is an acquired talent that has to be constantly practiced and reinforced. As a cast

member, cross training is accomplished on-the-job. “From the start, the training received

by cast members prepares them for several roles in the organization. The organization

places the highest priority on guest services, and trains this until it becomes second nature

to all cast members” (Wheeler 2006).

A major element of the customer service training initiative at Disney is Disney

University. Walt Disney established the Disney University after opening Disneyland

when he realized the need for a structured learning environment to teach the unique skills

that are required of Disney cast members. It was the first corporate university and

remains one of the largest corporate training facilities in the world. In addition to world-

class customer service training, Disney University provides Walt Disney World’s cast

members with world-class training in diverse skills ranging from computer applications

to culinary arts to regulatory training (Paton 1997). Capitalizing on the success of training

114


their own employees in delivering world-class customer service, Disney opened the

Disney Institute, which trains employees from companies all over the world every year.

At the Disney Institute they teach organizations from around the world the keys to

delivering unsurpassed customer service. The seminars cover areas that include: the

service theme, service standards, training service-oriented employees, setting

expectations, and delivering consistent customer service.

Disney has been able to effectively make customer service the first and foremost job of

everyone in the organization through training. Disney has been cited as the epitome of

customer service and empowerment. Employees are thoroughly trained and then told that

they have the authority to do whatever is necessary to deal with problems on the spot in

order to make customers happy. Because of their trust in the customer service training

process, management at Disney places the responsibility for the satisfaction of all

customers in the hands of their employees, no matter what level the employee may be at

within the organization. “Disney World believes that front-line employees should be the

first, and the last, contact for customers” (Tschohl 2006). For this reason, the Disney

organization has come to exemplify the best in customer service training.

The Important Elements of Delivering Great Customer Service

This paper has considered the benefits associated with providing good customer service

on an aggregate basis. This section of the paper will focus on several specific areas of

115


customer service that should be considered by any organization attempting to raise

customer service standards. It almost goes without saying that good customer service is

essential to sustaining any business. No matter how wonderful a job you do of attracting

new customers, you won’t be profitable for long unless you have a solid customer

retention strategy in place that includes delivering great customer service. Customers are

not concerned with a policy statement or the promise of exceptional service. They

remember how they have been treated by the organization’s employees and what actions

were taken to satisfy their needs (Clark 2006). As to this point, there are several specific

considerations for those employees of the organization that come into contact with

customers. Most consumers have a desire to receive good customer service. Quite often,

they desire the little things like common courtesies, efficient service, and appropriate

attention (Wheelihan 2002). The following sections are concerned with essential

elements of providing great customer service, including examples and definitions.

Engaging Customers – It is tough to exaggerate the importance of customer

engagement. Fully engaged customers deliver a 23% premium over average customers in

share of wallet, profitability, revenue, and relationship growth, according to Gallup

Research, while actively disengaged customers represent a 13% discount on the same

measures. Furthermore, workgroups that are in the top 25% based on their levels of

customer engagement outperform the rest on measures of profit, sales, and growth by a

factor of two to one (Rieger 2006). Engaging the customer is one of the first steps to

providing customer service that will make a lasting impression on the customer.

116


Be Accessible – Customers expect, justifiably so, that they will have access to employees

for questions and concerns, whether on the phone or in person. This element of customer

service should be addressed in an organizations customer service strategy. An effective

strategy will set the stage and define minimum levels of accessibility for customer access.

The expectations of accessibility should be defined and taught to all employees of the

organization. Employees should never be too busy to be accessible to customers. An

organization should consider investments in the infrastructure that are necessary to

provide accessible customer service. This may mean the addition of more people,

redesigning physical facilities, or changing the hours of operation for the organization.

Whatever the initiative, the goal should be to allow for the maximum accessibility

possible for the customer.

Be Reliable – Reliability means keeping the promise you made to the customer and

doing what you say you will do for the customer. It is important to keep in mind that

promises are not only made directly and verbally, but through a myriad of delivery paths

in various forms. Organizations make direct promises to customers through advertising

and marketing materials, in company correspondence and contracts, and in service

guarantees and policies published for everyone to see. In addition, customers will hold

the company to indirect commitments – promises that customers believe are implied in

the way the company talks about itself, its products, and its services (Zemke 2003). Not

keeping promises is one of the quickest ways to create disgruntled, former customers.

117


Display the Right Attitude – A person’s attitude colors the way they react to customers

because it has a direct effect on what they hear and how they respond. There are people

who can find opportunity in any adversity. Outgoing and optimistic, they strive to make

customer engagements fun. They inspire a contagious enthusiasm and make others

around them better (Freiberg 2004). Customers sense this and react better to these types

of people. Displaying the right attitude is important for everyone in the organization in

pursuing an atmosphere that promotes great customer service. Manners count when

dealing with customers. Be polite and exhibit an empathetic attitude toward customers.

Accept Responsibility – Everyone makes mistakes. The key to rectifying a mistake is to

be honest with the customer and to accept responsibility. “The absolute best way to

establish a sterling reputation as an organization is to be prepared to take responsibility

for whatever decision you make. It is a matter of integrity, and it will earn you the respect

of both the employees and customers of the organization” (Scott 2001). Accepting

responsibility also means being a team player and providing service to the customer on

behalf of the entire organization. There can be no “it’s not my job.” When a mistake has

been made, admit it and set things straight. When customers have a complaint – listen,

truly listen. Then, apologize and take corrective action. In many instances, the very act of

listening (without interrupting) can be enough to diffuse the situation and make the

person feel worthy as a customer (Clark 2006).

Be Responsive – Timeliness has always been an important part of delivering great

customer service, but in today’s hurried society, it has become even more important.

118


From fast food restaurants to one-hour photo finishing, customers are demanding faster

service than ever before. Companies that cater to time conscious customers are

everywhere you look. Their success affects your customers’ expectations of your

willingness and ability to do the same. When customers see other organizations

delivering faster and more efficient service, the will demand it of your organization as

well (Zemke 2003). If an organization is unable to be as responsive as their competitors,

they run the risk of delivering undesirable customer service, or at worst, losing customers

to the competition.

Be Empathetic – Being empathetic toward customers shows them that you care about

their situation. Take time to listen to their concerns, and take actions that show you care.

We are used to thinking of compassion as an emotional state, based on our concern for

one another. But it is also grounded in a level of awareness. “People see more of the

systems within which they operate, and as they understand more clearly the pressures

influencing one another, they naturally develop more compassion and empathy” (Senge

1990). To be truly empathetic with a customer an employee should put himself/herself in

the position of the customer. Recognizing the customer’s emotional state helps an

organization figure out the best way to effectively provide them the service that they are

looking for.

Be There For The Customer – In many ways, “being there” is the culmination of all of

the previous elements mentioned. However, it is also a state of mind. It means that you

are present at that time, at that moment, for the customer and his or her needs take

119


precedents over any other function. How much do you actually get done when you are in

one place thinking about a different place? Why not commit to being in one place at one

time? When you are present, not dwelling on what happened in the past or worried about

what may happen in the future, you are fully attuned to opportunities that develop and to

the needs of the people you encounter. You gain a healthier perspective and the capacity

for greater focus and creativity (Lundin et al. 2002). Customers will easily recognize

when they are the sole focus of an employee.

Monitor Achievement – Measurement is both the first and last step in producing

superior service. There is little sense in creating extensive measurement systems until all

the other elements of service are in place, or until there is something to measure. But

drafting an effective strategy, the first step toward better service, is difficult without some

measure of current service performance. Measuring service performance or quality is

quite different from measuring product quality because service is an experience. “The

best measurement systems focus on the three aspects of service: process, product, and

customer satisfaction” (Klein 1999). Measuring elements of the service profit chain

provides an overall indication of how an organization is doing, particularly on

dimensions important to the business such as customer service. It is important that the

methods of measurement be understood and consistent from period to period.

“Organizations that have constructed elaborate measurements and methods often find that

the cost of maintaining them and difficulty understanding them defeat their usefulness

and guarantee that they will fall into disuse. Such approaches often lead to the kind of

tinkering that changes measures from one period to the next, making it impossible to

120


track progress” (Heskett, Sasser and Schlesinger 1997). Great service is much like a gift;

it makes us want to continue to do business with an organization on a repetitive basis into

the future. With so much competition in the marketplace, customer loyalty is at a

premium. The best way to ensure customer loyalty is by consistently delivering great

customer service. You achieve customer loyalty by doing the little things that make

customers want to deal with the organization again and again, and recommend the

organization to others.

Satisfying customers can be a tricky endeavor when organizations are faced with multiple

complaints, demands, personalities, and angry customers. When these situations arise, the

best course of action is to honestly and expeditiously address them. Employees should

listen to the customer’s concern, empathize with their situation, and take actions to rectify

the situation (Selland 2006). One of the more important factors mentioned in this section

is to be “present” for the customer. Above all else, if customers really feel that you are

solely attending to their needs, they will experience a feeling of importance that will

translate into a positive customer service experience for them.

Before concluding this section of the paper, an analysis of customer service elements in

regard to Internet and telephone service should be done. With the hyper-expansion of the

“virtual” economy more and more customer transactions are taking place in a virtual

environment. These customers too expect great customer service. Just as in face-to-face

transactions, customers expect virtual transactions to contain the essential elements of

customer service. A recent study done on Internet customer service found that

121


satisfaction with various elements of Internet customer service is not at the levels many

would expect. According to the respondents, only 43 percent were satisfied with e-mail

as a customer service vehicle. Thirty-four percent were satisfied with Web sites in

general as a mode of customer service (Rohrbacher 2001). These numbers indicate the

need for organizations that do business in an online environment to better adhere to

desired customer service principles.

A recent study, commissioned by several Internet organizations and conducted by

Modalis Research technologies, took a look at customer service elements, their use, and

the satisfaction they provide. According to the study, 98 percent of U.S. consumers have

used some element of online customer service. Though almost all people have used

online customer service, 86 percent of U.S. customers have visited a Web site to find a

company’s customer service phone number (Selland 2006). This statistic points to the

desire of a majority of customers to speak to someone in an expedient manner. Many

online organizations provide e-mail addresses for customers to remit questions to.

“Receiving e-mails is only half of the task; customers expect a response in a short amount

of time. Good online customer service is possible; an organization just has to have the

desire to deliver it” (Rohrbacher 2001).

Exceptional Customer Service at the Ritz-Carlton

Very few organizations are identified solely based on the exceptional customer service

that they provide. A notable exception however, is the Ritz-Carlton Hotel organization.

122


The Ritz-Carlton organization is in the business of luxury hotels and was established in

Atlanta, Georgia in 1983. It is one of only a handful of American companies that has

earned the coveted Malcolm Baldridge National Quality Award multiple times, and the

only hotel company to earn the award more than once. The reason for this is simple;

employees at the Ritz-Carlton understand that they are not in the business of renting hotel

rooms, or providing five star meals, but rather their sole purpose is to provide an

unforgettable customer service experience for guests at their hotels. The organization has

been able to achieve this inordinate success in part, because of the way they view their

employees; not as employees, but as customers too. Everyone in the organization from

the President to the cleaning staff understands this and operates accordingly.

The company’s customer service strategies focus first on employees and then on the

hotel’s customers. “Our most important customers are employees,” explains Ritz-

Carlton’s Marketing Director Jennifer Blackman. “A culture of openness, clearly defined

expectations and constant circular feedback create an environment where employees are

engaged, empowered and valued for their contributions to the hotel’s success” (Piper

2006). This treatment of employees coupled with extensive customer service training, has

translated into what is considered by many to be an elite customer service experience.

The renowned customer service that is delivered at the organization’s properties has

prompted many of the hotels guests to remark that they “felt pampered,” “respected,”

“treated like royalty,” and “spoiled.” This sort of reputation has led to the Ritz-Carlton

brand being ranked fourth among the “strongest brands in the world.”

123


Service delivery at the Ritz-Carlton begins even before their guests arrive. Because the

organization uses a custom database to track their customers, preferences can be tracked

and catered to. The guest profiling goes into great detail. For example, a question about

wine might lead to a welcome gift of a bottle of chardonnay as opposed to merlot. This

attention to detail and customization of the service experience is in stark contrast to other

hotels that may have a standard welcome gift (like chocolates) for frequent guests that

may not be appealing to everyone. Staff members are able to use this database to capture

a plethora of different customer preference information. This capability can be viewed

and used by employees located throughout the chain (Davis 2005). This treatment leads

customers to feel special and attain a sense of importance, which in turn translates to a

high rate of customer satisfaction and subsequently, customer loyalty.

At the Ritz-Carlton, employees are not referred to as employees, but rather ladies and

gentlemen. The corporate motto is “ladies and gentlemen serving ladies and gentlemen.”

To provide superior service, Ritz-Carlton trains employees with a thorough orientation,

followed by on-the-job training, then job certification. “Ritz-Carlton values are reinforced

continuously by daily “line-ups,” frequent recognition for extraordinary achievement, and

a performance appraisal based on expectations explained during the orientation, training,

and certification processes” (Lampton 2003). The management of the organization

emphasizes service at all costs. The employees of the organization are empowered to do

whatever it takes to satisfy the guest. To ensure problems are resolved quickly, workers

are required to act at first notice, regardless of the type of problem or customer

complaint. All employees are empowered to do whatever it takes to provide “instant

124


pacification.” No matter what their normal duties are, other employees must assist if aid

is requested by a fellow worker who is responding to a guest’s complaint or wish

(Quality 2001). The company goes to great lengths to instill and reinforce the philosophy

and values in all employees. Everyone receives a wallet-sized copy of the “Gold

Standards”, which consist of the company’s Motto, Credo, Employee Promise, Three

Steps of Service, and the Ritz-Carlton Basics. These are reinforced in training, which

totals 250 hours for first-year front-line employees (Mene 2000).

The Ritz-Carlton name has not become synonymous with exceptional customer service

by accident, but rather by making customer service the main focus of the organization.

Even after winning the 1992 Malcolm Baldridge National Quality Award, Company

management raised the threshold for customer service delivery throughout the

organization. Goals for customer satisfaction were raised to the “top of the box.” Earning

ratings of very or extremely satisfied became a top priority as well as a key element of

the Ritz-Carlton strategy to achieve 100 percent customer loyalty. “In its operations, the

company set the target of “defect-free” experiences for guests, implementing a

measurement system to chart progress toward elimination of all customer problems, no

matter how minor” (Mene 2000). As a demonstration of the importance and focus by the

organization on this initiative, it can be found in the annual business plan of the company.

The company’s business plan demonstrates the value it places on goals for quality

products and services. Quality goals draw heavily on consumer requirements derived

from extensive research by the travel industry and the company’s customer reaction data,

focus groups, and surveys. The plan relies upon a management system designed to avoid

125


the variability of service delivery traditionally associated with hotels. Uniform processes

are well defined and documented at all levels of the company (Quality 2001).

The Ritz-Carlton name has become so synonymous with “exceptional customer service”

that in 1999 they opened the Ritz-Carlton Leadership Center. Just like the Disney

organization, Ritz-Carlton began the center as a way to train managers and leaders of

business how to benchmark many of the organization’s own best practices. Since opening

its doors in 1999, more than 10,000 senior executives and mid-managers have benefited

from the diverse mix of benchmarking seminars and leadership development workshops

at the Ritz-Carlton Leadership Center (Dardenne 2005). The organization did not actually

seek to begin the center as a profit generating entity, but was prompted to do so by many

of its business-managing guests. The company agreed to start the center because of its

strong belief in creating a “world class culture that promotes knowledge and sustainable

change” (Ritz-Carlton 2005).

Maintaining an intense focus on service delivery at the Ritz-Carlton organization has

proven to be good for customers, employees and corporate profitability. At the Ritz-

Carlton organization, a focus on service criteria has resulted in higher employee and

customer satisfaction, increased productivity and market share. Perhaps most significant

is increased profitability. Research shows that the stock price of companies with effective

Total Quality Management implementation outperformed the S&P 500 Index by

approximately 34% over a five-year period (Platt 2000). The organization is a shining

126


example of a company that has recognized the link between employee satisfaction,

customer retention and corporate profitability.

The Employee – Customer Relationship

There have been numerous empirical studies that have shown a strong positive

relationship between employees and customer satisfaction (e.g., Band, 1988; George,

1990; Reynierse & Harker 1992, et.). Some investigations have provided explicit

measures of this relationship. For example, a study at Sears Roebuck & Co. showed that a

five-point improvement in employee attitudes led to a 1.3 rise in customer satisfaction,

which in turn, generated a .5 percent increase in revenues (Bulgarella 2005). In other

studies, results have shown that upwards of 80 percent of customer satisfaction can be

attributed to the relationship between the employee and the customer. These results

indicate the importance of the employee to engendering a feeling of satisfaction in the

customer. This section considers the elements involved between the employee and the

customer that help to cultivate customer service and lead to customer loyalty.

Although it may seem to be an intuitive concept, it deserves mention that before an

employee can affect the satisfaction of a customer, the employee must be satisfied. The

elements of employee satisfaction have been discussed earlier in this paper. This is an

important consideration, as satisfied employees can make satisfied customers, which in

turn can positively affect the profitability of an organization. The strength of a customer’s

relationship with the salesperson affects repeat business, recommendations, and the

probability of paying a premium price for products and services. Not all employee-

127


customer relationships are the same, and trust is critical in building those that endure.

Salespeople are also important in reducing customer desertion to competitors. Customers

that experience high quality customer-employee encounters maintain a positive

assessment of a relationship with an organization (Johnson 2006). This makes the

relationship between employees and customers all that more important to organizations

seeking to create customer loyalty and translate customer loyalty into added corporate

profitability.

Many initial customer interfaces today have been automated. For a while, the automation

of customer service and support functions was seen as a legitimate way to improve

customer satisfaction. Many organizations invested heavily in service automation at the

expense of the human element. Customer satisfaction and loyalty invariably are earned

by delivering excellent customer service, and the human touch is often the key

differentiator. “Additionally, customers with higher lifetime value have learned to expect

more. “Gold customers often bypass automation and directly deal with support staff to

get their problems resolved” (Uckun and Matan 2007). Ultimately, the customers’

relations with an organization comes down to their relationship with the employees of the

organization. A problem or need that is addressed quickly, efficiently, and with care and

concern for the customer can lead to strong customer loyalty (Borland 2006).

Customer – server relationships can be so powerful that in some cases, the customer may

choose to leave an organization if the employee leaves. Customer – server relationships

may be valued so highly that customers may be willing to follow servers, even if they

128


change employers. This can be found in businesses that require a high level of personal

service. Thus, patients follow doctors from one hospital affiliation to another. And

investors follow brokers from one brokerage firm to another (Heskett, Sasser and

Schlesinger 1997). These examples serve to highlight the magnitude of the influence the

customer – employee relationship can have on an organization. If an organization has an

employee or employees that are involved in many relationships like this, it is easy to

begin to understand the potential financial impact it may have on the organization.

It has been found that customers with good customer – employee relationships will

continue to do business with an organization that may provide an inferior product versus

the competition, if a good relationship exists with an employee. When interviews were

conducted with customers to find out why they were especially loyal to local repair

garages, an interesting contradiction was found. On the one hand, people believed that

mechanics at chain outlets and auto dealers had better and more sophisticated training.

On the other, they put more faith in the local mechanic’s judgment and believed he’d give

them better service. “In a word, people simply felt more comfortable doing repeat

business with the same individual, regardless of technical finesse” (Reichheld 1996). To

add to this finding, it has also been discovered that employee loyalty adds to new

customer acquisition as well as retention. Research has also shown time and time again

that satisfied customers are the number one source of new customer referrals. Once again,

the employee – customer relationship proves to have an affect on customer

retention/loyalty, and corporate profitability.

129


Many cynics contend that it may not be rational to correlate employee satisfaction with

customer satisfaction. Real corporations, they argue, need profits and return-on-capital,

not just happy employees and satisfied customers. It is possible for an organization to

have highly paid loyal employees, as well as satisfied customers that enjoy low prices

and a high degree of service delivery (Kaplan and Norton 1996). The statistics however,

prove the cynics incorrect. A recent survey of 55,000 employees matched employees’

positive attitudes toward customers, and a correlation to higher profits. It is important for

employees to feel that they are fairly compensated, but beyond that, they want to feel like

they are an important part of the organization and are valued by their leadership. In

addition, employees derive satisfaction from knowing that they bring value to customer

relationships that translate into growth and profitability for the organization (Greenberg

2006).

Customer satisfaction really comes down to the level of employee satisfaction being

experienced by the organizations employees. An organization must understand the factors

that facilitate the development of the core values and key motivators of their employees.

A system should be put in place to constantly identify the level of employee commitment

to customer focus. The system can then be extended to create a statistical model that

represents the linkages between employee attitudes, feelings and behaviors that are

important outcomes such as customer satisfaction, customer loyalty and even

organizational profitability. Research indicates that an organization’s internal service

orientation and customer service climate have a significant impact on the satisfaction and

loyalty of the customer (BAI 2005).

130


The Customer – Employee Relationship at Pike Place Fish Market

Pike Place Fish market was a humble, quiet and unassuming little fish market located on

the Seattle, Washington waterfront in 1965 when it was purchased by one of its

employees, John Yokoyama. For the next twenty years John ran the fish market with a

modicum of success. In 1985, in an effort to expand the operation, John started a

wholesale fish operation. In the spring of 1986, Pike Place Fish Company in Seattle’s

Public Market was on the verge of bankruptcy. The seafood market where he had once

been an employee but was now the owner, was more than $300,000 in debt and sinking

deeper fast (Fine 2000). About that time, an old friend, Karen Bergquist, introduced him

to her husband, Jim Bergquist, who happened to be owner of bizFutures – a company that

offered business coaching. Mr. Bergquist proposed that he use his service to get John’s

business back on track and beyond that, to create an extraordinary future. John accepted

and the rest is history (Bergquist 2005).

The first step for Pike Place Fish was to decide who they wanted to be. In the words of

John Yokoyama: “In one of our early meetings with Jim, we began an inquiry into who

do we want to be? We wanted to create a new future for ourselves. One of the young kids

working for me said, “hey! Let’s be World Famous!” I initially though that was a stupid

thing to say.” The more they talked about it, the more the entire team became excited

about being World Famous (Pike Place 2006). As a result of this meeting, John added

‘World Famous” to the logo and had it printed on all of the company materials. The next

step for the team at Pike’s was to figure out how to translate the term “World Famous”

131


into something tangible that would improve their business and set them apart from the

competition.

It did not take long for the company to realize that for them, being considered “World

Famous” meant being present for their customers. They believed that “being present”

exceeded providing just outstanding customer service, it meant being there and relating to

the customer as a human being. They take all of the attention off of themselves to be only

with the customer, and they actively look for ways to serve them. With each customer,

they seek a new way to make their day. They have made a commitment to have their

customers leave with the experience of having been served. The customer experiences

being known and appreciated whether they buy fish or not. They’ve discovered what it

really means to make a difference for the people they serve. They’ve also learned what it

takes to break records and to go beyond what everyone thought was possible (Bergquist

2005).

What John and his employees ended up creating was an entirely new customer service

philosophy commonly known as “FISH!” The philosophy is centered on the following

four guiding principles:

Play – Work made fun gets done, especially when we choose to do serious tasks in a

lighthearted, spontaneous way. Play is not just an activity; it’s a state of mind that brings

new energy to the tasks at hand and sparks creative solutions.

132


Make Their Day – When you “make someone’s day” (or moment) through a small

kindness or unforgettable engagement, you can turn even routine encounters into special

memories.

Be There – The glue in our humanity is in being fully present for one another. Being

there also is a great way to practice wholeheartedness and fight burnout, for it is those

halfhearted tasks you perform while juggling other things that wear you out.

Choose Your Attitude – When you look for the worst you will find it everywhere. When

you learn you have the power to choose your response to what life brings, you can look

for the best and find opportunities you never imagined possible. If you find yourself with

a negative attitude, you have the power to change it (Fine 2000). By instituting and living

these four principles, the employees at Pike Place Fish market have been able to deliver

an unmatched customer service experience that has become renowned world-wide.

Pike Place Fish market is a workplace where everyone chooses to bring energy, passion

and a positive attitude with him or her each day. It is an environment in which people are

truly connected to their work, to their colleagues, and to their customers. People from all

over the world now come to Pike’s to see the employees throwing fish and engaging

customers (Bergquist 2005). The employees at Pike Place are the example of what

employees can do to effectuate the ideal customer – employee relationship. The flying

fish, shouts, chants, teasing of customers, and antics are entertaining. But one soon comes

to realize that they have walked onto a stage and have become a member of the cast. The

fish guys are sizing you up and just waiting for the opportunity to throw you a line. “They

are committed to recreating their vision of the market each day. But that can only happen

133


if they find a way to make a memory for you so that when you leave, whether carrying a

fish or not, you leave with something you will want to share with others” (Lundin et al.

2000).

The customer – employee relationship that exists at Pike Place is so successful that it has

spawned a consulting business that helps organizations recreate the success of Pike Place

at their own companies. The FISH! Philosophy has also led to a series of customer

service and employee involvement videos, as well as several books about the concept.

For the past several years, through the films and the books, The FISH! Philosophy has

spread into organizations around the world. “People are reinventing what their time at

work can be about, and the passion, energy, and accountability they are discovering that

lead to surprising business improvements” (Lundin et al. 2000). John Yokoyama and his

employees have tapped into something special that has led to the overwhelming financial

success of their organization. That something is how to serve the customer uniquely,

personally, and leaving them feeling appreciated. These are traits that many have copied

in order to bring that success to their organizations.

Transforming Customer Satisfaction Into Customer Loyalty

Recent studies provide empirical evidence of something we already know intuitively:

customer loyalty is a key driver of profitability. Creating customer loyalty must be an

integral part of an organization’s strategy, particularly in a time of industry consolidation.

The ability to accurately assess and understand the customers’ requirements and

expectations is fundamental to business success. Furthermore, the ability to comprehend

134


customer loyalty drivers should be the foundation for an organization’s strategy

development (Teegarden and Krok 2006). A common mistake that many organizations

make is assuming that satisfied customers are loyal customers. This section of the paper

will analyze the elements of a “loyal” customer and examine the benefits of loyal

customers to an organization. Although customer satisfaction is a key element in

determining customer loyalty, the two are by no means synonymous with each other.

The first thing necessary in order to accurately analyze the benefits of customer loyalty is

to define the term. The first problem is that it’s not that easy to do. The term “customer

loyalty” actually has many definitions, ranging from volume purchase rewards programs

to emotional bonds between customer and supplier. “Some say customer loyalty is the

same as customer retention when measured from the seller’s point of view” (Swaddling

and Miller 2002). Research by The Gallup Organization has shown that there is an

essential ingredient in the customer relationship; an ingredient that companies typically

overlook when they assess the strength of their customer relationships. This critical

component is the emotional attachment felt by the customer. The emotional attachment

possessed by loyal customers can be translated into an organization’s profit performance

(McEwen 2001).

Several researchers have even offered hypotheses that suggest customer loyalty can be

calculated by applying a mathematical equation. This method applies to the entire

customer base, rather than with one particular customer, which may be valuable

information if used correctly by an organization. These researchers suggest that the

135


simplest way to approximate average customer tenure is by calculating the overall

defection rate and inverting the fraction. This is easily done. First, count the number of

customers that defect over a period of several months, then annualize this figure and

express it as a fraction of the customer base you began with. “If you lose 50 out of 1,000

customers over a three-month period, this equals 200 customers per year, or one-fifth of

the customer base. The second step is to invert the fraction. In this case it would result in

5 over 1, meaning that the average customer stays with the organization for five years”

(Reichheld 1996). Organizations can use this information to understand the rate at which

they are losing customers, and hopefully be able to take actions that will lower the

number of defecting customers.

A satisfied customer is a good customer, but may not be loyal at all. A satisfied customer

may feel that their needs were met, the product was satisfactory, and the service was

alright. A satisfied customer may not have been ecstatic with their experience with you,

and may choose to go to a competitor next time, despite their satisfactory experience with

your organization. What is a loyal customer? One who feels great about dealing with

your organization. Their needs have been met and/or exceeded, they thought the delivery

was great, the service was great, and the experience was great. These customers have

been so satisfied with their experience that they will tell others. They will retain feelings

of satisfaction and remember their experience (Gitomer 1998). A loyal customer

experiences a positive emotional event that they want to share with others, and have a

desire to experience over and over again. In order to dazzle customers and turn them into

loyal customers, an organization must tap into the customers’ needs, which is not an easy

136


task. Customers are more informed and more demanding than ever before. They tend to

ask more in depth questions, they research prospective purchase in greater detail, and

they look for organizations that will provide high levels of satisfaction and quality

(Kindinger 2005).

An analysis of loyal customers will yield the result that they all have a level of “customer

perceived value” with the organization that they are loyal to. Customer perceived value

(CPV) is defined as “the prospective customer’s evaluation of all the benefits and all the

costs of an offering as compared to that customer’s perceived alternatives” (Swaddling

and Miller 2001).

Figure 12: Customer Perceived Value

Source: National Taiwan University of Science & Technology

As the graph above depicts (Fig. 12), CPV measurement differs from customer

satisfaction in each of the characteristics. The sample includes both customers and

prospective customers. Asking only current customers of the organization about their

experiences usually will produce biased results because those customers can be

137


predetermined to be favorably inclined on the part of the organization (Swaddling and

Miller 2002). This analysis indicates a strong need to also assess the desires of potential

customers in order to adequately assess the organizational factors that may lead to

customer loyalty.

Many organizations tout high resulting customer satisfaction surveys, while at the same

time experiencing equally high customer defection rates. Organizations need to realize

that satisfaction is no longer an accurate measure of customer loyalty. Customer

satisfaction can be delivered in a single contact with the organization, whereas, customer

loyalty evolves over time and is based on many emotional elements that stem from

different experiences with an organization. Even if organizations feel that they have loyal

customers, it is important to understand why the customer is perceived to be loyal. Is it

price, brand, convenience, service, or a mix of all of these elements? If it is just one of

these elements, and the customer lacks an emotional connection to the organization, there

probably is no real loyalty that exists in the relationship. If the customer is loyal because

of low price, for example, the second a competitor offers a lower price, the customer

defects and becomes loyal to the new low price. This points to the fact that there is more

to loyalty than just money. Money is typically used initially to pique the interest of a

customer, but the extent to which it will work depends on their satisfaction level with

their current organization (Gitomer 1998). Because of this, an organization should be

focused on the whole relationship with a customer from every perspective, not just

concentrated on one element.

138


American companies have become very proficient at monitoring and measuring customer

satisfaction. Companies know they need to pay attention to their customers. They know

the financial benefits that come from keeping their customers happy. And they’ve done

their best to put “satisfaction” programs in place. “Yet monitoring of various U.S.

industries reveals that relatively few companies (17%) have improved their customer

satisfaction index measures after six years. Fewer still, only one in twenty, show any

consistent improvement on these scores” (McEwen 2005). This is not to say that

measuring customer satisfaction is not a worthwhile initiative by organizations, but that

the information must then be used to determine how specific elements of satisfaction can

be translated into loyalty. Customer loyalty relates to probable behaviors. To measure

customer loyalty, an organization must develop specific dimensions of customer loyalty

to determine the description and intensity of customer loyalty in aggregate and within

each core segment of key customers served. It is essential to have a solid grasp of which

factors in your business relationship with your customers are most important to them

(Teegarden and Krok 2006).

Providing customer satisfaction is typically associated with front-line employees that

come into direct contact with the customer. However, in order to create customer loyalty,

every part of the organization needs to be engaged in the act of serving the needs and

desires of the customer. By meeting basic requirements, employees of the organization

can prevent customer complaints and dissatisfaction. By reaching beyond basic

requirements to anticipate and satisfy the customers’ unstated needs, they also develop

customer confidence. “To earn customer loyalty, however, all parts of the organization

139


(not just those which interact directly with external customers) must work together to

provide the uncommon, unexpected dimensions of quality and service that delight, rather

than merely satisfy your organization’s customers” (ODI 2006) (Fig. 13). Now that it has

been made clearer exactly what a “loyal” customer is, the paper will consider the benefits

to an organization of having loyal customers.

Figure 13: Customer Loyalty Pyramid

Source: ODI

For many years managers have believed that the key driver of profitability is share of

market. However, Earl Sasser, working with former student and Bain Company Principal,

Fred Reichheld, found this not to be true. Based on the collection of factual experiences

of a number of organizations, they identified a factor more often associated with high

profits and rapid growth – customer loyalty (Heskett, Sasser and Schlesinger 1997).

Therefore, it is essential that organizations be able to identify loyal customers in order to

ascertain their contribution to profitability, and ultimately, their value to the organization

140


in terms of revenue. Whereas satisfied customers may contribute to organizational

profitability, this cannot be relied on and is most likely not constant or stable. At the same

time, the income stream from a loyal customer is constant and can be relied on to

continue to contribute to organizational profitability.

Calculations can be made to assess the value of each customer, especially today, with

access to more sophisticated customer tracking systems. Once you have an accurate

picture of the true value of a customer, you’re in a position to calculate what it would be

worth to increase your customer retention rate – which is the only realistic way of

evaluating investments in customer acquisition and customer loyalty. “Retention

economics lets companies make rational, dollars-and-cents decisions about the value of

increased customer loyalty and tells them accurately, which loyalty-enhancing

investments will meet their rates of return” (Reichheld 1996). It is important for

organizations to understand that not all customers are profitable. Being able to calculate

the profitability of a customer keeps a customer-focused organization from becoming

customer obsessed. The customer profitability measure may reveal that certain targeted

customers are unprofitable. Because initial customer acquisition is expensive, newer

customers will usually prove to be unprofitable because they have not yet had the

opportunity to build a buying relationship with the organization. This makes the

calculation of lifetime profitability important as the basis for retaining or discouraging

currently unprofitable customers (Kaplan and Norton 1996).

141


We are now poised to enter a new era of loyalty management in which winning

companies will move beyond measuring customer satisfaction and defection only to

approaches based on a broader understanding of customer migration and attitudes.

Organizations can capture this significant loyalty opportunity and influence migration

and churn by as much as 20 to 30 percent by addressing three key opportunities: manage

customer migration, not defection, integrate attitudes, needs, and satisfaction to

understand drivers of migration, and tailor investments and loyalty approaches to the

most critical parts of the opportunity (Gokey and Coyles 2001). This is being made easier

through the access of Customer Relationship Management (CRM) programs, which will

be discussed in greater depth later in this paper. The key for organizations is to identify

satisfied customers that they can, in turn, make loyal customers in order to add to

ongoing organizational profitability.

Measuring Customer Satisfaction

This paper previously discussed conducting customer satisfaction surveys as a tool to be

used in assessing the perceived service received by an organization’s customers. There

are however, other methods that can be used to assess the level of customer satisfaction in

addition to customer surveys. Research has shown that it takes up to six times the

investment to acquire a new customer as to keep an existing customer. Therefore, it

would make sense to measure what your customers think so that you can work to

maximize your investment. “If customer service is the only thing separating you from

your competition, wouldn’t it make sense to measure the level of service your

organization provides” (Saxby 2006)? The last section of this paper analyzed the

142


difference between “satisfied” customers and “loyal” customers. This section of the paper

will examine the different techniques available to assess the organization’s customer base

level of satisfaction, so that this satisfaction may be turned into customer loyalty, and

subsequently, organizational profitability.

Every organization is lucky, or good enough, to have at least a few accounts that they feel

are loyal and resist the temptation to defect to the competition. Upon closer examination,

organizations realize that when they look at why those certain customers are loyal, it is

because the organization comes through for them, no matter the circumstances. However,

the competition understands this and is constantly finding new ways to lure these loyal

customers away from other organizations. Because of this, it is necessary to constantly

assess the customers’ level of satisfaction. An important element to consider is that an

organization is not susceptible to abandonment by their customers. Fortunately, there are

many different and effective ways to measure customer satisfaction (Castiglione 2006).

One of the ways that many organizations measure customer satisfaction is by the success

of their sales numbers. This method however, totally overlooks the satisfaction level of

the customer. It may only indicate that an organization is selling more goods or services,

but not that these customers will ever return, or give a referral.

The first and most widely used instrument that this paper will examine is the “customer

satisfaction survey.” The term “survey” is a very broad reference that may entail many

different types of instruments. In order for the survey to be valuable to the organization, it

must be designed and administered correctly. Too many customer satisfaction surveys

143


contain the wrong questions, are given in the wrong circumstances, or omit important

considerations for the customer. Conducting a customer satisfaction-surveying program is

a burden on the organization and its customers in terms of time and resources. “There is

no point in engaging in this work unless it has been thoughtfully designed so that only

relevant and important information is gathered. This information must allow the

organization to take direct action” (Cacioppo 2000). Many organizations do not set out to

create errant customer satisfaction surveys; it is just a product of self-fulfilling prophecy

in most cases. Too many companies have settled into a comfortable rut of changing their

approaches to get the results they want. Ironically, the more critical renewal business is in

an organization, the greater emphasis on inflating customer satisfaction metrics, and the

greater the tendency to design research programs that deliver results that are expected.

This should serve as a point of caution, as this may not happen on purpose and gradually

evolves over time (Columbusn 2005).

If an organization takes the time to design a customer satisfaction survey the right way, it

can be an effective tool for improving customer satisfaction. An effective survey must

consider that certain elements of the organization’s service delivery may be satisfactory

to customers, but this may not matter, as they may also be unimportant to them. If an

organization is assessing the satisfaction of a group of people (customer satisfaction,

employee satisfaction, etc.), they are probably interested in knowing how important the

different elements are to the group that is being polled. The information is critical to

understanding exactly what needs to be fixed or adjusted. It is important to assess the

factors that customers are dissatisfied with and that are important to them. There may be

144


things that customers experience dissatisfaction with, but that are still unimportant to

them. Knowing this allows an organization to concentrate on the expectations that are

important to customers (Measuring 2006). On the converse, an organization may find that

customers are just moderately satisfied with an aspect of service, but yet it is the most

important thing to them. This should be the first priority for the organization in order to

ensure immediate results for improving their customer satisfaction.

Customer satisfaction surveys, even if they are designed correctly, are not always

appropriate for every organization. For instance, customer satisfaction surveys are better

suited for organizations in the service sector or other non-manufacturing fields. Unlike

the manufacturing industry, in which quality can be assessed by an objective index like

the size of produced parts, the service sector offers little in the way of objective quality

measures. Even hard measures (for example, time) used in the non-manufacturing

environment might not reflect the true quality of service. “Because quality is determined,

in part, by the extent to which goods meet the customers’ requirements, the measurement

of quality in non-manufacturing settings is probably best indexed by customers’

perceptions of the service they received”(Hayes 1998). Customer opinions and feedback

are necessary in striving to improve customer service. However, an organization must

ensure that the instrument is pertinent, as well as constructed properly, in order to elicit

correct and actionable responses.

As this paper has stated, the customer satisfaction survey is more suited for a service-

oriented organization. Surveys tend to ask questions that only reinforce what

145


organizations perceive to be the important elements of service and satisfaction. Because

service quality is intangible, there is a strong tendency to manage service businesses by

focusing on what is most tangible: such as numbers of customers served, cost of

providing the service, and revenues generated. Organizations should be cautious of

measuring only service components that are easy to measure. Often times these factors

give a false impression of how well the organization is actually performing relative to

customers’ actual perceptions. This results in an outcome of work getting done but at

steadily declining standards, by employees who are unaware of their declining

performance (Senge 1990).

Another more controversial way of measuring customer satisfaction is to actually

calculate the lifetime profitability of each customer. Although this may sound like a

daunting task, today there are many software programs that can track all customer

statistics of an organization (CRM systems will be discussed comprehensively in the next

section of this paper). This concept, often referred to as calculating the Net Present Value

(NPV) of a customer, was previously discussed here. The concept equates lifetime value

and profitability to satisfaction. Customers’ wallets are the source of all life-giving cash

flows. Remember too, that the only way to maximize the present value of a customer

base is to earn the loyalty of its most profitable members, which means giving them

superior value. Organizations should remember that only by orienting decisions and

investments toward superior customer value can an organization ensure that there will be

plenty of value left over for employees and the owners of the organization (Reichheld

1996). Although this method does have merit, it is an internal measure that does not

146


consider the input or opinions of the customer. It is highly recommended that this method

be used in conjunction with customer surveys in order to ensure a more comprehensive

set of variables by which to measure the satisfaction levels of the organization.

A good example of where organizations are effectively using ROI (return on investment)

and NPV (net present value) methods, coupled with customer satisfaction surveys, can be

found at online businesses that transact a high rate of commerce over the Internet. Any

organization wants to understand how they can better serve the customers that provide

the best return on investment, and also how to turn not so profitable customers into higher

ROI customers. Often, different stakeholder organizations that contribute to a website

focus on different end-user goals and needs. When surveys are able to provide data that

benefit the performance of employees, enhance customer satisfaction, and improve

organizational operations, continuous and accurate improvement can be attained (Acme

2006). In an online environment, trends can easily be tracked to better understand

customer habits, trends, and dollars spent. Access to customers is generally easier in an

online environment. For these reasons, organizations can tailor surveys to specific

customers, with specific buying habits, in order to improve customer satisfaction on

many different levels.

The issue of “actionable” outcomes has also been discussed previously. This point cannot

be stressed enough. If customers take the time and effort to answer a survey, and give

relative feedback, they expect to see action taken on their input. The purpose of customer

satisfaction research is to improve customer satisfaction and yet so often surveys sit

147


collecting dust. Worse than that, customers have generously given their time to assist in

the survey believing that some positive action will take place. Because of this, their

expectations will be raised. It is important for organizations to take into account all of the

data in order to avoid overlooking an element of customer feedback that requires needed

attention (Full Service 2006). The organization will most likely be able to act on many of

the suggestions in a relatively short period of time. It is the longer-term issues that will

require more discipline and focus, and may well affect the way the organization currently

conducts business.

Other, less commonly used methods of ascertaining customer satisfaction levels include:

mystery shopping for experiential input, follow-up with personalized feedback request

after a purchase, and a personal phone call from a representative of the organization.

Although these methods are used far less than the standard customer satisfaction survey,

in many ways, they can be far more effective. For example, a call to a customer after he

or she has purchased a good or service from your organization allows them to be more

honest and objective about the experience, without asking for a major time and effort

commitment. People typically react very favorably to personal contact, especially in a

proactive manner. Unfortunately, many organizations only resort to personal contact with

their customers when an obvious problem arises. Customers that feel a personal bond

with organizations are most often, loyal customers.

Organizations should ensure that they have a system in place to review all negative

responses to survey questions and answer them in a timely fashion. Likewise, it is a good

148


idea for organizations to share the results of the feedback with their customer base, as

well as the steps being taken to respond effectively to customer input and suggestions.

Prevention of customer loss or the erosion of customer satisfaction begins with a solid

understanding of where the organization stands with its customer base and their actual

level of satisfaction with the organization. The more comprehensive and successful the

measurement process is, the better opportunity an organization will have to correct

identified problems and solidify relationships with customers (Castiglione 2006).

Obviously, effectively measuring customer satisfaction is an integral part of being able to

deliver better customer service and engender greater customer satisfaction. Organizations

that have been able to do this with success have been able to experience a more engaged

and loyal customer base.

Chapter 5

Knowledge Management & Customer Relationship Management Systems

With ever increasing improvements and technologies comes the ability to better manage

and control organizational information and data. Two topics that deal with this are

knowledge management systems (KMS) and customer relationship management systems

(CRM). Although the two are different, they both leverage technology and the ability to

aggregate data for the purposes of enhancing organizational abilities. This section will

briefly examine the definitions of both terms, explain the benefits of each, and cite

relevant examples for the implementation of both. The objective of this section of the

paper is to highlight the applicability of new technologies to new customer sales

platforms and increasingly changing customer demands in regard to customer service.

149


What is Knowledge Management?

The term knowledge management is a broad term, without a distinct definition. However,

it is commonly accepted that the term refers to an organization’s ability to acquire, store,

manipulate, and share data and information for the purpose of gaining a competitive

advantage. The tangible and intangible knowledge possessed by organizations and their

employees is rapidly being viewed as an important, valuable asset. “The flood of

management interest in knowledge reflects not just an awareness of the value of

intangible assets but also that organizational innovation – perhaps more than product or

process innovation – is vital to sustainable competitiveness” (Starkey, Tempest and

McKinlay 2004).

Although implementing a knowledge management system can be expensive in terms of

both human capital and money, many organizations are finding that the benefits far

outweigh the drawbacks. There are many different reasons that organizations choose to

implement KM systems (Fig. 14) (Appendix 6). Not the least of which is the ability of an

organization to capture and contain important and valuable knowledge, experience, and

abilities that the organization has been built on. The knowledge can come in the form of

data, personal experience, process documentation, or a myriad of other organizational

sources. The overall objective of the system is to build a resource for employees of the

organization that can effectively help them do their jobs and leverage the existing

knowledge, experience, and relevant documentation that already exists within the

company.

150


Figure 14: Adoption Factors for Knowledge Management Systems

Source: California Management Review

As competition for organizations increases, knowledge management systems are being

used at increasing rates as a way for implementing organizations to keep and leverage

existing corporate knowledge in order to gain a competitive edge (Fig. 15).

151


Figure 15: Purposes for Knowledge Management

Companies are beginning to realize that there are vast and valuable knowledge resources

that exist within their organizations that are not being accounted for, saved, or used.

There is a realization that vast amounts of intellectual resources exist that are not being

shared, and therefore cannot be used as a foundation for collaboration (Liu 2005). As

organizations come to realize this, they are increasingly taking the steps necessary to

harness and control this knowledge asset. They are doing this by establishing knowledge

management systems in their organizations.

In order to better understand how knowledge management systems can be established and

used, it is beneficial to examine the different types of knowledge management that exist

within organizations today (Fig. 16 & Fig. 17).

152


Figure 16: Static Knowledge Management

Figure 17: Automated Knowledge Management

Many organizations have less sophisticated forms of knowledge management and may

not even realize it. Some of these take the form of notebooks, policies, procedures, or

project notes. Although some employees of the organization may use these resources

from time to time, most employees do not have access to them or even know that they

exist. When this happens, employees either recreate existing knowledge or use a myriad

153


of other resources. This results in inefficiencies, as well as the lost opportunity to

capitalize on the intellectual property that has already been created.

Organizations today are increasingly implementing more sophisticated forms of

knowledge management systems that are supported by state of the art technology. These

new systems give employees from all areas of the organization the ability to access data,

information, and ideas that have been stored in a knowledge management system. These

systems generate value in the form of the new knowledge that is created when accessed,

disseminated, an internalized by the employees of the company (Marwick 2001).

Organizations such as Siemens and Bayer that have made the financial and time

investments necessary to implement a robust knowledge management system are now

reaping the rewards of having done so.

Customer Relationship Management Systems

Due to rapidly changing consumer purchasing habits, that include Internet purchasing and

other automated forms of relationships, customer relationship management is becoming

increasingly more important. Customer Relationship Management (CRM) systems have

rapidly gained recognition as a powerful set of tools to drive customer loyalty. CRM

systems offer a comprehensive approach to the way customer information is gathered and

disseminated, such as purchasing and service history and buyer preferences, to help the

organization and its employees better anticipate and meet customer needs. By developing

a sense of customer loyalty, CRM offers the promise of maximizing the lifetime value of

each and every customer for the organization (McIntyre 2006). Although CRM systems

154


can prove to be beneficial to an organization, they may also prove to be expensive and

require a complete organizational priority change in order to implement. Having said this,

in most cases, the expense as well as the necessary operational changes are well worth

implementing such a system. True CRM requires a complete behavioral shift for

everyone in the organization. It requires an organization to become truly customer-

centric. Research has indicated that in the future, long-term success will be governed

solely by each company’s ability to develop relationships with its customers on an

ongoing basis. This section will comprehensively analyze the many elements associated

with the need, implementation, management, and advantages of CRM systems.

The Need and Benefits of CRM Systems

Customers have more power than ever before. Enterprises must compete based on

relationships, not just the basic products and services customers have come to expect. “In

addition to traditional direct channels, businesses are moving to the Web and also

working with channel and alliance partners to meet customer needs” (Business Week

2006). Because of this, organizations must now communicate with and understand the

customer better than ever before. The best method by which to accomplish this is by

implementing a fully integrated CRM system. Organizations that are considering a CRM

strategy must understand that CRM is more than just an initiative undertaken in order to

improve customer service, but rather, it is a new business strategy that requires the

organization to truly become a customer-centric organization. CRM implementation

requires the organization to focus on the customer and customer interaction at every stage

155


of the system. In a word, CRM leverages technology to coordinate business-customer

interactions with the objective of building long-term loyalty (Fig.18).

Figure 18: Reasons to Implement CRM

Source: ISACA Surveys

Technological developments over the past decade have transformed business-to-customer

relationships. The emergence of electronic commerce and virtual supply chains has

defined a competitive environment characterized by a greater variety of alternatives

among products (that are actually becoming less differentiated), services, channels, and

communication vehicles (Schultz 2000). On the customer side, the result of this

transformation has been declining customer loyalty and increased expectations in terms

of customer service. A study conducted by Bain & Co, reports that corporations in the

Unites States, on average, can expect to lose half of their customers within a five-year

period. At the same time, technological developments in the capture, storage, and use of

customer information have created tremendous opportunities for companies to better

serve their customers (Dyke 2001). Due to rapid defection rates and the high costs of

customer acquisition, coupled with the advances in technology, organizations have

156


recognized the need to become more customer-centric in order to better compete in the

marketplace today.

Many organizations today treat all of their customers the same way. Few organizations

today really know who among their customers are the ones to focus on. Although it is

known that not all customers are created equally, many systems and services provided by

different organizations tend to make exactly this assumption (Meltzer 2003). All

customers are not created equally, nor do they have the same spending habits, wants, or

desires. This is the reason many companies have turned to CRM systems to solve these

problems. CRM can be a powerful tool to understand customer needs and help derive

additional value from customers. Developing the right customer strategy, aligning the

organization to serve its customers, and establishing the supporting processes and tools

for the strategy are all integral components of CRM. Once an organization is effectively

able to implement a CRM strategy and begin to create added customer loyalty, they are

then in a position to transition into customer value management.

Probably the biggest advantage to an organization of implementing a CRM system is the

ability to personally deal with each customer based on his or her buying habits.

Maintaining control of customer relationships is possible only through consistent

implementation of classic, well-proven customer bonding techniques, such as

individualized customer care and communications, rewards for customer value and

loyalty, special consideration for high-value customers and customized products and

services (Ferruzza 1999). All of this is possible with the implementation of a

157


comprehensive CRM system. Customer analysis applications that are part of CRM

systems can provide utilities with useful customer segmentation, groupings, message

personalization capability, event monitoring, what-if scenario modeling, and even

predictive modeling showing customer propensity to buy additional products or services.

Many CRM vendors cite the multitude of CRM benefits, which seem to be naturally

appealing (Cohen 2005).

As previously mentioned, CRM implementation requires a totally new business strategy,

coupled with a new way of thinking. The reasons for this are firmly entrenched in the

traditional business model of most organizations. Every organization wants to retain their

existing customers. Few organizations, however, are implementing positive strategies

aimed at retention. Most companies are organized and geared toward customer

acquisition. Their advertising and sales programs are designed to find and promote their

products and services to new customers. The organizations are organized on a product or

brand basis, not on a customer segment basis (Hughes 2006). Though many of these

organizations claim to focus on customer service and satisfaction, they are still not totally

focused on the customer as the center of their business. This is the reason that it is

necessary for organizations that implement a CRM system to become operationally

focused on the customer, rather than their products or services.

CRM systems allow organizations to build comprehensive data bases that collect

information relative to their customer’s unique behaviors and tastes. The word “profiling”

has come to have a negative connotation in today’s society, but that is exactly what a

158


good CRM system allows an organization to do in order to track, predict, and influence

customer behavior. Earlier, this paper examined customer data collection at the Ritz-

Carlton organization. “Having collected a great deal of information about its best

customers through its guests’ requests and complaints, all of which are captured in their

vast guest history data base, the Ritz-Carlton hotel organization has created the potential

for delivering customized service to literally tens of thousands of guests” (Heskett,

Sasser, and Schlesinger 1997). Although this paper has referenced the example of the

Ritz-Carlton hotel organization, many other well-known companies such as: Amazon,

Ebay, Apple, Microsoft, and the like, are using CRM to deliver a unique experience to

the customer.

Web-based businesses have primarily been the front-runners in the utilization of CRM

systems. Many consumers who choose to do business via the Internet have no doubt

experienced some sort of customized service that is a product of a CRM system. Many E-

businesses have been early and aggressive adopters of CRM technology. CRM models

have been proposed and implemented in a variety of E-business contexts, including

providers of electronic product catalogues, retail services, and financial services. It is

estimated that approximately 40% of on-line organizations have invested in CRM

solutions that link together multiple channels of communication with customers (Tweney

2000). These E-businesses that have fully integrated CRM systems are able to track every

piece of data related to a customer transaction from the very first contact. This allows

them the opportunity to track a myriad of categories that can help them assess the value

of a customer to their organization.

159


As many online organizations have realized, the implementation of a fully integrated

CRM system allows them to mine and extract data at its lowest level of granularity. This

allows for a 360-degree look at all transactions based on the type of information the

organization is trying to assess. An organization can store actual customer transactions

and relate tem back to the costs that are imposed. They can measure by changing volume,

changing value of the transaction, distribution channels used, changing patterns of

expenditure, different services used, and so on (Meltzer 2003). With this information,

organizations can customize their offerings, concentrate on profitable customers, and

manage their business more efficiently from an overall prospective. Although CRM

applications are found in higher density in online service organizations, any organization

that has a sizeable customer base can realize synergies and customer service

improvements as a result of having one.

Now that some of the major benefits of implementing a CRM system have been

discussed and analyzed, some of the goals of CRM implementation will now be

considered, such as: lower costs, identification of customer desires/habits, improved

customer service, customer-centric marketing, a calculation of ROI for each customer,

and creating a comprehensive customer database. In addition to these goals, the concept

of value chain management (VCM), which is a comprehensive business strategy that

incorporates CRM, will be discussed in relation to CRM. Value chain management

enables companies to maximize customer value at the overall lowest cost. Resources are

aligned to cost-efficiently service customer segments in a manner that boosts the overall

160


value derived by customers from their relationships with suppliers. Through strategic

relationships and collaborative management, organizations develop capabilities and

engage resources within the value chain to meet their customer value creation and

resource optimization objectives (Van de Lanotte 2003).

The aim of any organization should be to leverage technologies in order to increase

efficiencies and lower costs. CRM systems do just that. Although they are initially quite

expensive to initiate, over the long run they can prove to be quite effective at creating

cost saving economies of scale and other associated efficiencies. CRM systems helps

organizations lower costs by reducing vendor costs, eliminating costs associated with

mass marketing, eliminating costs associated with manually tracking customer

information, automating customer contact and follow-up, and targeting the most

profitable customers. Organizations also realize cost savings by utilizing the CRM

software to emulate their star salespeople. By extending intelligence solutions to their

customer base, organizations can function like their star performers, building increased

trust and loyalty by using the collected information responsibly in an effective manner.

Businesses can simultaneously compile and learn from customer data on all customers,

hardly a realistic goal for even the most talented sales individual or teams. Organizations

that capitalize on the potential of integrated customer intelligence can gain substantial

tactical, strategic and competitive advantages that result in cost savings and increased

profitability (IBM 2006).

161


The cost savings stemming from the implementation of a CRM system should not be

measured solely on the expense savings realized, but also by an increase in revenues as a

result of the system implementation. If revenue has not been optimized or increased by

the organizations CRM initiative, it has failed. The entire basis of the initiative is to

gather knowledge of your customers, to gain intelligence that can be leveraged in the

marketplace. The basis and the mainstay of Customer Relationship Management is

knowledge driven and information intensive, so if dollar signs cannot be attributed to

loyalty, satisfaction and improved service and communications, a CRM system is a failed

initiative (Tanoury 2006). Organizations should do an upfront cost analysis of the

proposed system to ensure that the anticipated efficiencies will be realized after

implementation of the system.

Because so much business, both from the consumer’s standpoint as well as the

organizations is conducted via e-mail, the subject deserves some analysis. E-mail is used

in many CRM systems in order to support and facilitate customer transactions. Because

of its easy to use format and worldwide access, e-mail is used more and more as a vehicle

to service customers. Organizations can offer customers two ways of sending e-mail

messages to the company: unstructured (free-form) e-mail messages and structures (Web-

form) e-mail messages. Unstructured e-mail messages are messages that customers send

directly to a company’s public e-mail address. Structured e-mail messages are messages

that are generated by interacting with a company’s Web site (Lakhanker 2006). Both of

these methods are then made part of the organization’s CRM system, and subsequently

acted upon in a customized way. One of the biggest customer complaints today is that

162


organizations take too long to respond to e-mails, or don’t even respond at all. A CRM

system with integrated e-mail functionality can help to alleviate this issue.

CRM Systems Implementation

Before an organization implements a CRM strategy of any kind, they should take the

time and effort to ensure that there are proper policies and procedures in place so that the

system will be used as intended. A major factor in these considerations is the issue of

standardization, especially at organizations with multi-sites or customer access points.

Standardization breeds familiarity among customers. And familiarity fosters usage,

particularly for services involving high-perceived risk. “Multisite services likely to be

accessed at more than one location present a strong case for standardization, especially in

the quality of products and services delivered. Standardization is often driven by the need

to establish policies resulting in consistent service that leads to a set of expectations for

service that doesn’t vary greatly from one customer to another” (Heskett, Sasser, and

Schlesinger 1997). This is especially true of business that is conducted on the Internet.

Customers expect that the protocol for conducting business at a particular site will remain

constant and that they can expect the same kind of service every time they visit the site.

In addition to the implementation of any system itself, there is the need to understand the

related technologies and flow of information that will be created by the new system. In

fact, the shift to a fully integrated customer information system is so dramatic that even

companies experienced in customer-intelligence technologies can be baffled by the

business processes, system architectures and other demands involved, including the need

163


to support emerging technologies such as wireless communication and smart devices,

which transmit an ever-growing amount of useful information (IBM 2006). Even though

CRM implementation is a major strategic decision and not a technological solution, it can

be a highly capital-intensive endeavor due to heavy investments in CRM technologies.

Regardless of technologies used for CRM, system integration is almost always the initial

step for its implementation. Integration and interoperability among all the front office as

well as back-office information systems including legacy systems is essential so that a

single version of the truth about each customer can be obtained (Azani 2005).

When implementing a comprehensive CRM system, it is also important for organizations

to define identifiable and realistic parameters. Although the systems should store most of

the data related to a customer transaction, be able to report the data in meaningful form,

and prompt the organization based on certain customer triggers, it will still be used by

employees of the organization. When defining the scope of the knowledge base, the most

common mistake is to try to include too much. Overly ambitious deployments almost

always result in what’s called “the Swiss cheese problem”, a knowledge base that is solid

in places, but full of holes. This is a recipe for failure, because if users can’t find the

answers they want most of the time, or get the wrong answers, they will quickly stop

using the system (Egain 2004). It is essential that the new CRM system not be perceived

as too complex and thus, counter-productive to delivering improved customer service.

Before implementing any sort of a CRM strategy, an organization should ensure that the

proposed CRM solution is scaleable and upgradeable for future growth and modification.

164


Most CRM systems are considered “middleware”, or in other words, the glue between a

business and its customers. Many CRM vendors claim to provide a comprehensive

solution to an organization’s CRM needs. However, such claims are far from reality and

eventually an organization ends up acquiring various technologies from different vendors

to meet their original CRM requirements. As a result, a firm ends up with a mix of

various incompatible products. In such a heterogeneous environment there is a profound

need for innovative and integrated development strategies that are capable to address the

new business and technological paradigms, and develop CRM systems that are long

lasting, evolving, and have the capability to quickly and affordably adapt to technological

changes and growing needs (Azani 2005).

CRM technologies are not all the same, in fact, many work very differently from each

other. Organizations need to understand the proposed system and how it will operate

from an information standpoint, as well as from a hardware and systems standpoint. A

good example to prove this point can be found with Internet or call center based CRM

systems. These systems typically use a customer identifier (Name, SSN, account number,

etc.) in order to track customers and identify all of their information and buying habits.

These systems incorporate various intelligence agents in order to provide the ability to

deliver personalized service, or be prepared for certain customer desires and requests.

This requirement may be different, or required to function differently from a system that

is being used by an OEM manufacturer to track multiple shipments to a single customer

on a repetitive basis. Integrating information systems throughout the organization is

165


absolutely essential so that a single view of customers and also a single version of truth

about each customer can be obtained on an any time, any-place basis (Swift 2001).

As this paper discussed previously, the importance of planning for a CRM

implementation cannot be stressed enough. One of the greatest mistakes a management

team can make is to force-feed new technology across the organization. This is

particularly true with a CRM implementation. As firm management prepares for a CRM

rollout, planning and patience are critical. Working with the implementation team from

the software developer, management should agree upon a plan of phasing software use

across the firm. Some organizations orchestrate a CRM rollout by location, others by

practice group or department. This type of rollout plan allows implementation teams the

opportunity to adjust strategies and exploit successes (Cowgill 2006). In addition to a

phased in approach, it is beneficial for employees of the organization at all levels, to

understand and be able to see for themselves, the support and enthusiasm of the executive

management team. Management should be honest about the amount of time and effort

necessary to implement such a system, but also tout the benefits of the system when it

does get implemented.

The challenges inherent in CRM implementation are equally daunting for companies that

have already begun the process and for those who are still contemplating whether to take

the leap. Regardless of where the company stands with regard to CRM, it is key that the

organization has a market-driven customer strategy, along with a detailed understanding

of all the requirements of the new tool, not just its features and functionality (Rosenbleeth

166


et al. 2006). As this paper will show in following sections, CRM initiatives can fail if not

implemented in the right manner, and with errant planning and preparation. Planning is

an essential part of the equation, as organizations need to fully understand why they want

a CRM system and how they will use it. Any technology works the same way. All of the

fancy software and technological devices, no matter how pricey or complicated, are

merely tools to solve your business problems and improve the organizations ability to

please its customers. Nevertheless, there are many CRM implementations that court

disaster by purchasing technology with only a vague, sketchy idea of what tools are

actually needed (Business Week 2006).

Another major consideration for CRM implementation is the hardware and technology

deployed by an organization. This is always a challenge, as technology changes so

rapidly that there is a worry that planning too far ahead may actually cause the

organization to install hardware that will not meet the specifications necessary in the

future. The challenge is how to meet short-term business goals while devising

technological solutions that enable forward-thinking companies to gain a competitive

edge. Clearly, CRM requires innovative approaches to system design, data management

and complex data analytics. How organizations address these challenges will determine

the success of their online, interactive presences and, in many cases, the success of their

overall business strategies (IBM 2006). Therefore, in addition to customer service,

marketing, and the like, it is imperative that the technological considerations associated

with a CRM system are incorporated into the strategic business plan as well.

167


Another very important aspect of CRM implementation is the ability of an organization

to determine the risk tolerance associated with implementing the CRM system. As is the

case with most software applications that handle customer information, risk tolerance and

risk management must be addressed in an appropriate manner. Now that risk

management has been established as important to organizations, which risks should be

tolerated? The methods and approaches to determining the organizations’ tolerance to

CRM risks are as varied as the organizations themselves. When asked how they

determine risk tolerances, 32 percent of organizations indicated informal methods such as

arbitrarily assigning risks a high, medium or low rating based on common sense or their

intuition. Surprisingly, 22 percent of the organizations did not determine or calculate their

risk tolerance at all (Erickson and McGlaughlin 2002). However, those organizations that

do take a methodical approach to assessing risk do so in varied ways and use many

different risk indicators as measures by which to measure the overall risk (Fig. 19).

Figure 19: CRM Risk Tolerance

168


Because of the proliferation of online businesses over the past ten years, CRM

technologies have become a prolific element of the Internet based business model.

Organizations, while trying to maximize the power of the system, must still maintain a

keen eye on how the information is being used and by whom. The main goal of CRM

applications is to provide the right content from a database to its users. The right content

is defined in terms of satisfying a customer’s explicit and latent informational needs

while matching the mental abilities, context, and environment of the customer

(Calaminus et al. 2001). Because there are many different options available to

organizations, including the previously discussed open access option, in terms of defining

and allowing access to the system, these considerations must be determined during the

implementation phase. Once an organization allows access to or manipulation of data in

certain ways, it is a difficult process to change the data access protocols after CRM

implementation.

Potential CRM Pitfalls

Although the previous sections outlined the need, benefits and implementation of CRM

systems, there are some cautionary points that should be noted on the subject. In the rush

to implement a CRM application, many potential problems and pitfalls are often

overlooked. Some involve the same considerations and principles that have been

important for years, but many of these have a new twist. One of the biggest mistakes that

organizations make is to implement a CRM system thinking that it will instantly solve all

of their customer tracking and satisfaction concerns and initiatives. The most significant

problem is the perception that CRM is a magic bullet, a panacea for all customer support

169


problems. This is simply not true. The perception and the expectations that follow from it

are potentially catastrophic. “Overselling something as “new and hot” as CRM is likely to

occur and have serious consequences for the next new and hot project. Any future CRM

effort could be seriously compromised, not to mention the reputation of the IS

department. This, in turn, will continue to deprive the organization of the benefits that

should accrue from CRM ” (Shah 2007).

The fact of the matter is that CRM systems are viable and a very powerful customer

service tool. However, organizations continue to fail to prepare and design systems

adequately to be the effective tool that they are meant to be. Gartner Group studies

concluded that up to 51% of large CRM solutions implemented so far have failed to

perform up to expectations, primarily due to overly complex features and operation.

Nevertheless, the goal of seamless access to complete customer information is so

compelling that Gartner also expects worldwide CRM system sales to triple from $23.2

billion in 2000 to over $76 billion in 2005 (Inge 2001). The overwhelming reason that

can be attributed to the failure of these implementations is due to an organization’s failure

to understand that CRM is not just a computer related system, but a complete business

philosophy. This concept has been analyzed previously in this paper but cannot be

stressed enough, as it is a major factor in the success or failure of a CRM system solution.

Yet another issue regarding CRM systems is the belief that the system will act in real

time, and therefore contribute to accurate market segmentation and customer

communication. Although this is possible, it is not an easy task and requires a complete

170


understanding of the system by an organization. When an organization makes the

decision to go “real time” things do get more complicated. For example, personalization

and customization of content on a Web site is a real time process. A customer may be

assigned a segment code and initially presented with a page of content designed

specifically for this segment. But as a Web session continues and the customer moves

(behaves) in certain ways on the site, real time decisioning may change the content that is

presented to the customer based on his/her behavior and the content delivery strategy for

the Web site. This process will change the message, information or promotion offered to

the customer. Thus, he/her is treated differently from the other customers in his initial

segment (Feruzza 1999). This creates a problem for organizations in that they can no

longer determine what has driven the customer to behave in a certain way, and may

compromise future tracking of this customer accurately.

There are even some scholars who have extensively studied the subject of customer

satisfaction, loyalty and the effects of CRM systems and are against their implementation

for such purposes. “If you really want customers to keep coming back, then toss out those

glossy brochures from vendors looking to sell you the latest CRM software. Customer

loyalty does not stem from clever stratagems to collect every conceivable piece of data

from customers and then cross-sell them something they don’t want,” says Fred

Reichheld, Boston-based Bain & Co. Director Emeritus and Bain Fellow, who has

studied the topic extensively. The thought being that loyalty is not gained by the face

time an organization is able to produce with the customer, but instead, because of long-

standing relationships that result over many transactions. “CRM is manipulation in too

171


many cases. Companies are acting on information of customers against their interests,

calling them at home at night, charging them the highest price point [that the CRM

system shows they will pay]” (Reichheld in Prewitt 2002).

A final element of CRM systems that should be discussed here is the human element.

Many organizations implement CRM systems with the false belief that the systems will

fully automate the customer satisfaction function and remove the human element

completely. This belief, if it comes to fruition, will actually accomplish the opposite of

the intended consequence of improved customer service. No system can replace

individual personal responsibility, either, in terms of taking ownership of a problem. If

you can’t get to the information right away and tell the customer you’ll have to get back

to him/her, you have to make sure someone else does, or the organizations credibility is

shot (Inge 2001). This is a critical factor in the success or failure of a CRM operation that

needs to be addressed even before a particular solution is implemented. The key is to

effectively join the human element with the tremendous capability of the system and the

data that it stores and manipulates. Due to the increasing importance of CRM systems

and their relation to an organization’s ability to deliver customer service, as well as

engender greater customer loyalty, the CRM model at Amazon.com will be analyzed in

the next section.

CRM at Amazon.com

There is arguably no other company in the world that is more identified with CRM

technologies than Amazon.com. In many ways, Amazon.com is perhaps the company

172


that is most closely tied with the E-Commerce phenomenon. The Seattle, WA based

company has grown from a book seller to a virtual Wal-Mart of the Web selling products

as diverse as Music CDs, Cookware, Toys and Games and Tools and Hardware. The

company has also grown at a staggering rate with revenues rising from approximately

$150 million in 1997 to $3.1 billion in 2001 (Krishnamurthy 2001). One element that can

definitely be attributed to the company’s success is the delivery of great customer service,

as well as its efficient use of their CRM system. Amazon.com from the beginning has

relentlessly focused on providing good customer service, which in turn has generated a

high degree of trust and a high sales volume from its customers. The company has been

able to accomplish this by providing secure transactions, having reliable fulfillment and

shipping, offering a broad product selection, and emphasizing discounts. The company

has also been a pioneer in its relentless use of Web site design testing and optimization,

constantly evaluating everything including every facet of information associated with a

customer transaction (Perez 2005).

Amazon.com is a Fortune 500 company that opened its doors on the World Wide Web in

July 1995 and today, considers itself as having the “Earth’s Biggest Selection.” Although

the company is known as a product sales portal, with literally thousands of products

available for sale, the company itself considers themselves in business to serve their

customers. A major part of this “customer experience” is the ability to maintain software

systems that will track and focus on the elements of the Amazon.com experience that

leads to increased customer satisfaction. Amazon states that their software engineers,

computer scientists, and management teams focus on continuous innovation to provide

173


further convenience for their customers. They work to earn repeat purchases by providing

easy-to-use functionality, fast and reliable fulfillment, timely customer service, feature-

rich content, and a trusted transaction environment (Amazon.com 2006). The key to their

timely customer service and feature-rich content available to each specific customer can

be found in their proprietary, highly robust CRM system.

Experts on customer relationship management attribute the success of Amazon to being

able to preserve the “single face” for each of their millions of customers. Because of a

robust CRM system, Amazon is able to treat each customer individually, as if they were

the only customer that the organization is focused on. An Amazon customer can log onto

Amazon.com, click on “Your Account” to see their entire history with the company. The

record of all of the customer’s transactions, listed credit cards, shipping and billing

addresses, the status of all orders from last year to five minutes ago is there. It is very

much like looking into a mirror for the customer. “If a customer talks to anybody from

Amazon at any time, they can swiftly deal with concerns because they see the total of all

customer dealings with the company” (Business WeekA 2006). This is what is meant by

“single face”, and there is no better organization at delivering this kind of personalized

service every time than Amazon.com.

This paper has mentioned the growing use of e-mail and the function of e-mail

management in providing customer service. Amazon recognized this fact very early on

and incorporated e-mail customer service strategies into their CRM and strategic business

plans. To take best advantage of the Web, companies must proactively engage and

174


motivate website visitors. Organizations can now segment web visitors using their

expressed interests, behavioral patterns, past purchases, responses to promotional

campaigns and more (Sterne 2006). Because Amazon recognized the value and

importance of e-mail early on, they have been able to enjoy a competitive advantage over

their competition. Amazon is so recognized for its customer service and competitive

advantage that many think it was the first major online retailer. However, this is not the

case. E-Tailers such as CDNow were already in place before Amazon.com appeared in

the music category. In many cases, established players in the brick and mortar space had

also established a presence in the online arena. Moreover, shortly after Amazon started to

become a recognized commodity on the Internet, traditional stores such as JC Penney and

Circuit City expanded to the online arena (Krishnamurthy 2002). In order to thwart many

of the competitive threats the company faced, Amazon turned to its CRM system to set

itself apart from other online retailers.

Another CRM strategy that sets Amazon apart from its competitors is their relentless

pursuit of finding new ways to exploit personal information to increase sales and

customer service. The company is not satisfied with its current CRM system and is

constantly seeking to improve upon what it has already built. For years, Amazon has

collected detailed information about what its customers buy, considered buying, browsed

for but never bought, recommended to others or even wished someone would buy them.

It has built ever-more sophisticated tools to recommend more purchases, direct customer

searches toward products it thinks the customer is most likely to want, or in some cases,

stop the forgetful customer from buying the same book they purchased five years ago

175


(Associated Press 2005). Amazon has been able to effectively use this information to

build a personal relationship with their customers that has translated into not only

exponential sales growth but also, an overwhelming level of customer loyalty and

satisfaction.

An interesting element of Amazon’s successful use of CRM technologies is their entrance

into affiliate marketing agreements and programs. In the bricks and mortar world,

referrals are a recognized source of sales leads. In online applications this is called

“affiliate marketing.” Affiliate marketing is the online application of this marketing

method, where one Web site agrees to pay another Web site a commission for new

business opportunities it refers to the site. Amazon.com has a strong affiliate program

consisting of more than 900,000 participant sites, called Associates, which receive up to

15% on sales their referrals generate (Laudon and Traver 2003). Ironically, Amazon is

able to capture even more customer information and track customers that it may have

never seen as a result of programs like this. As is the case with all other information at

the company, these “referrals” are also tracked, noting where the customer was referred

from, time of day, and particular banner add that was of interest to the customer. Because

of the strength of Amazon’s CRM system, they have been able to effectively track the

customer migration and profitability associated with affiliate programs, not to mention

the value of the added customer information garnered as a result of the program.

Conducting business in an online environment requires a level of trust that is necessary in

order to build relationships and a loyal customer base. Most consumers are aware that

176


online purchasing carries with it added risks due to potential confidential information

being compromised. Amazon has been able to use its CRM system to track the

confidentiality and security of their customers’ information. Amazon.com has been put

forward as a model for the way to deal with security and for the reassurance they give

their customers. They start from the good position of being both a well-known brand and

the best-known e-commerce brand (Whitely 2000). Their web page has a section on e-

commerce security that explains all of the elements of security and the steps that the

company takes to ensure the continued security of the information of its customers. In

addition, the company utilizes its CRM system to track customer information as an added

precaution against fraud or information compromise.

Some of the ways that Amazon collects customer information has been criticized, such as

its prolific use of “cookies” to ascertain customer information. Cookies are chunks of

data which are stored on the computer running the Web browser and which can be

accessed by the browser throughout their interaction with a particular Web site. Such

cookies can, for example, store the data associated with a shopping cart (Ince 2002).

Although critics of Amazon point to the company’s use of cookies as a negative aspect of

collecting customer information, the practice is prevalent among most businesses that

have a web presence. The Company has been able to convince its customers that any

information that is collected about them is being used to ultimately benefit the customer

and their personal choices. According to survey after survey, the company is doing a

commendable job, as they continuously attain the highest customer satisfaction and

customer loyalty scores on surveys.

177


Amazon.com’s entire business model has come to personify customer service and

meeting the known, as well as, unknown needs of its customers. This fact can be directly

attributed to its reliance on and very effective use of its CRM system. Amazon realized

early on that amazon.com was more than just a book site, more in fact than just an e-

commerce site; it realized that it was in the business of giving customers what they

wanted and providing exceptional customer service in the process. Through its fixation

on delivering world-class customer service coupled with its CRM systems and data

capture programs; Amazon has created its own architecture of participation. Amazon has

very successfully been able to understand and leverage customer level data, and

subsequently build critical decision models in order to analyze the data. The company has

excelled in using past purchasing data to personalize customers’ shopping experience,

modifying pages on the fly to adjust them to individuals’ preferences and interests.

Amazon.com has managed to do this in a way that most customers perceive as useful and

not as a creepy surveillance practice (Perez 2005). Any way that Amazon is analyzed, it

is easy to see that a majority of the company’s success can be attributed to the use and

management of its CRM systems.

Chapter 6

The Effects of Employee Satisfaction- Customer Retention on Profitability

This paper has comprehensively analyzed the elements that lead to the creation of

employee satisfaction and customer retention. The basis for the analysis is the hypothesis

that employee satisfaction and customer retention have important implications for

178


corporate profitability. The different elements of each of these areas has been discussed

in relation to improving employee satisfaction and customer retention respectively, but

also their individual implications on the increased profitability of the organization. This

section of the paper will consider the effects, together, on corporate profitability in order

to convey a complete understanding of the link between employee satisfaction and its

relationship to customer retention and corporate profitability. After reading this section,

the reader should understand the direct correlation and strong relationships between

corporate profitability, employee satisfaction, and customer retention.

The service-profit chain theory establishes relationships between profitability, customer

retention/loyalty, and employee satisfaction. The links in the chain are as follows: 1)

Profit and growth are stimulated primarily by customer loyalty; 2) Loyalty is a direct

result of customer satisfaction; 3) Value is created by satisfied, loyal and productive

employees; 4) Employee satisfaction, in turn, results primarily from high-quality support

services and policies that enable employees to deliver results to customers (Dandrade and

Jones 1995). The remainder of this section will examine these four main areas, as they

relate to and are derived from the analysis contained in this paper. A synopsis will be

given of the research pertaining to each of these links in the chain as they relate to

enhancing corporate profitability. Because each of these elements has been previously

analyzed comprehensively, only a summary of their relationship to profitability will be

examined.

179


The Effects of Customer Loyalty on Corporate Profitability

As this paper has stated and which should be an obvious point, without customers, there

can be no profitability. Therefore, it is vital for an organization to concentrate on making

customers satisfied, and more importantly, create a sense of loyalty that will lead to a

long-time customer. Customers may be satisfied with a one-time sales experience, but yet

not be loyal customers that will lead to profit enhancement for the organization.

Therefore, it is vital for companies to focus on the elements that turn satisfied customers

into loyal customers. Understanding the key drivers involved in creating customer loyalty

is to understand the underlying facets of what makes an organization profitable. Loyal

customers maintain an emotional connection to the organizations that they consider

themselves loyal to. It is no longer enough to rely on customer satisfaction. In order to

grow and improve corporate profitability, organizations must now concentrate on turning

satisfied customers into loyal customers.

There is no doubt that an organization can be successful and even profitable by just

satisfying customers. However, satisfied customers may be a on-time event, whereas

loyal customers can be relied on to be part of the organization’s income stream far into

the future. Because of the long-term relationship, loyal customers are far more profitable

than one-time, satisfied customers. As the analysis has shown, many organizations are

very adept at measuring customer service, but have very little insight into how to measure

or even quantify their customer loyalty. Companies that set out to create a loyal customer

base must do so as an entire organization with one goal; to be a customer centric

organization. In their seminal work analyzing the service profit chain, Heskett, Sasser and

180


Schlesinger (1997) stated, “ Based on the collection of factual experiences of a number of

organizations, an element was identified that is more often associated with high profits

and rapid growth – that being customer loyalty.” The analysis and research cited in this

paper overwhelmingly supports the hypothesis that organization’s that focus on creating

customer loyalty will enjoy a higher level of profitability than those that choose not to.

Customer Loyalty is a Direct Result of Customer Satisfaction

This paper has already concluded that organizations may increase profitability by

creating loyal customers. Creating loyal customers does not happen with a one-time

transaction, but rather over time. In order to turn customer satisfaction into customer

loyalty, an organization must focus on understanding the needs and requirements of the

customer. As previously stated, “A satisfied customer is a good customer, but may not be

loyal at all. A satisfied customer may feel that their needs were met, the product was

satisfactory, and the service was acceptable.” The key is that a previously satisfied

customer may choose a competitor the next time for a variety of reasons. A loyal

customer that has had many satisfactory experiences will come back because they are

loyal and feel some emotional connection with the organization. In addition, they will tell

others of their experiences and tout the organization to whoever will listen. Loyal

customers have their needs met continually by the organization and do not think of going

to a competitor for superficial reasons, such as a one-time savings.

An organization must become customer-centric in order to deliver customer satisfaction

over and over again that can be translated into customer loyalty. Organizations that focus

181


on the customer as an asset and the central element to their business, and that maintain

this focus at every level of the organization are considered to be customer-centric.

Customer-centric organizations focus on the customers needs constantly in order to

maximize customer satisfaction. By doing this on a continual basis, they are able to create

customer loyalty in a faster and more consistent manner. Customer centricity is not just

about delivering quality service at the point of sale, but rather, it is an entire business

strategy and philosophy. Organizations that are creating customer loyalty by being

customer-centric organizations are focusing on the customer’s needs beyond today. As

Hamel and Prahalad (1994) have stated, “The objective is to amaze customers by

anticipating and fulfilling their unarticulated needs.” By becoming adept at this quality,

organizations can turn satisfied customers into loyal customers and therefore, positively

affect corporate profitability.

The analysis contained in this paper has sufficiently established the positive correlation

between employee satisfaction and customer satisfaction and loyalty. The final area that

should be examined is the link between customer loyalty and profits. Customer loyalty

analyses have shown that a significant increase in profits can be attained when a company

retention rate is shifted from 90 percent to 95 percent per year. Improving customer

loyalty is a solid strategy that should be part of every business plan (Lenskold 2004).

Loyal customers tend to be the more valuable customers for an organization and

therefore, should be protected and communicated to. Because loyal customers are more

profitable, organizations should have a strategy in place that has the maximum impact

possible on these customers and that provides the highest level of rewards to the most

182


valuable customers. It is now widely accepted that organization’s that concentrate their

efforts on managing profitable and loyal customers, rather than expending all of their

resources on new customer acquisition, enjoy bigger returns on their investment.

Managing ROI at the customer level is far superior than managing the ROI for

acquisition, retention, and all other campaigns independently (Lenskold 2004).

Organizations that realize this and put strategies in place that leverage the relationship of

the loyal customer are in the enviable position of securing a competitive advantage that

others seek to emulate.

Creating Value Through Satisfied, Loyal & Productive Employees

The elements involved in creating satisfied, loyal and productive employees has been

thoroughly analyzed and discussed in earlier sections of this paper. What will be

considered in this section is how to leverage those employees for the purpose of creating

value in order to improve corporate profitability. This paper previously analyzed the

many elements that contribute to employee satisfaction comprehensively. In order for

organizations to capitalize on these elements that create employee satisfaction, they must

consider employees important and essential assets of the organization, rather than just

part of the operations process. Organizations that concentrate on creating value in their

employees are able to realize a positive correlation in customer loyalty, and subsequently

in added profitability, as seen by the previously cited examples. As was previously stated,

“establishing an organizational culture that promotes the elements necessary to enhance

employee satisfaction would prove to have a positive affect on both customer retention

183


and corporate profitability.” The next section will examine specific benefits and results

that can be realized from this concept.

Satisfied Employees’ Impact on Customer Loyalty and Corporate Profitability

In depth research on the topic of the service profit chain indicates that there are three

important elements that make up the chain; employee satisfaction, customer

retention/loyalty, and corporate profitability. Although each is reliant on each other to

form the “chain”, the process begins with employee satisfaction. In essence, the

employee is a conduit between customer loyalty and the resultant positive impact on

corporate profits. Employee satisfaction is a key attribute of the engaged employee who

embodies a high degree of motivation and sense of inspiration, personal involvement and

supportiveness (Oakley 2004). This employee satisfaction is in turn, translated into the

ability and willingness to provide the best customer service, and consequently customer

satisfaction, as possible. An organization that is able to constantly perpetuate this

synergistic relationship will benefit by realizing greater customer loyalty that will be

translated into increased corporate profitability.

When the service profit chain is implemented correctly and effectively, it operates as a

constant and consistently moving process with one element of the chain enhancing the

next. When a company consistently delivers superior value and wins customer loyalty,

market share and revenues go up. “The better economics mean the company can pay

workers better, which sets off a whole chain of events. Increased pay boosts employee

morale and commitment; as employees stay longer, their productivity rises and training

184


costs fall; employees’ overall job satisfaction, combined with their knowledge and

experience, leads to better service to customers” (Reichheld 1993). When customers

receive repeated excellent customer service from motivated, knowledgeable, and loyal

employees, they too become loyal and contribute to the service profit chain of an

organization. Although the employees are reliant on the organization for a job, the

organization in turn, is reliant on the employee to create a loyal relationship with the

organization’s customer so that maximum profitability can be achieved and result in an

ever-larger investment in the employees of the organization. This investment helps to

ensure the ongoing inertia of the service profit chain within an organization.

Through thorough analysis of this subject, it can be proven that there is a direct link

between employee satisfaction and customer satisfaction that leads to an improved

financial performance. This paper comprehensively analyzes the elements associated with

employee satisfaction and include areas such as: leadership, work environment, training,

employee development, employee recognition, organizational goals, communication,

teamwork, employee empowerment, social interaction, organizational culture, benefits,

and employee motivation, all of which are integral and important to creating a satisfied

workforce. Organizations with engaged employees have customers who use their

products more, and increased customer usage leads to higher levels of customer

satisfaction. It is an organization’s employees who influence the behavior and attitudes of

customers, and it is customers who drive an organization’s profitability through the

purchase and use of its products (Oakley 2004).

185


Chapter 7

An Analysis/Evaluation of the Service Profit Chain at Maine Savings

This section of the paper will consider the different elements of the Service Profit Chain

(Employees, Customers, & Corporate Profitability) at Maine Savings, the employer of the

author of this paper, Anthony Emerson. The analysis will be in the form of examples

from his own work experience and attempt to demonstrate the effectiveness or

ineffectiveness of academic theory relative to providing satisfactory business solutions,

or contributions to the decision making processes at Maine Savings. The format of this

analysis will be the same as the previous analysis contained in this paper. First, employee

satisfaction and its elements will be examined, second, the elements of customer

satisfaction will be analyzed, and finally, these will be examined in relation to corporate

profitability at Maine Savings. Some of these topics have already been discussed in this

paper and will be noted when appropriate, in order to avoid redundancy.

Anthony L. Emerson is the Vice President of Finance/Accounting/Operations for Maine

Savings and has been employed at the organization for four years (at the time of this

writing). In his capacity at the institution he is responsible for the finance department, the

accounting department, the IT department, a credit card portfolio, retail product pricing,

commercial pricing, purchasing, and also acts as the institutions Bank Secrecy Officer

and Compliance Officer. Reporting directly to him are two Assistant Vice President’s

(Accounting and Operations), a Card Services Supervisor, and a supporting staff of ten

employees from these different functional areas. His main responsibilities include the

daily management of approximately $175 million in financial assets, the IT related

186


infrastructure, a $7 million Visa portfolio, the pricing of consumer/commercial loan

products, and the human resources in his charge. Anthony is a member of the institution’s

Senior Management team and reports directly to the President and CEO of the firm, John

C. Reed.

Maine Savings History

Maine Savings began as BARCO Federal Credit Union in Millinocket, Maine in 1961 for

the benefit of the employees of the Bangor & Aroostook Railroad Company. In the forty-

five years since, it has grown to be the largest credit union in Maine as measured by

membership with over 25,000 members, 500 Select Employee Groups, $170 million in

assets, and nine branches throughout Eastern and Central Maine in Hampden, Milo, Jax

Lab, Corinth, Vassalboro, Brewer, Hampden, Ellsworth, and two branches in Bangor. In

2001, BARCO’s Directors made the strategic decision to change the name to Maine

Savings, to more accurately reflect their diverse customer base, allow for further

geographic expansion, and garner better name recognition. Much of Maine Savings’

growth has occurred under the direction of John Reed, the current President and CEO,

who was hired in 1990. The Board’s Executive Committee is an instrumental group and

is comprised of four long time Directors, each having more than thirty years of affiliation

with the organization (BARCO 1990).

In 1993, Maine Savings, along with six other Maine financial institutions and the Maine

Credit Union League, founded CUSO Mortgage Corporation. A little more than a decade

later, CUSO is one of the largest Maine based mortgage lenders in the state and the fourth

187


largest multi-owned CUSO in the country. As of 2006, CUSO Mortgage employed more

than twenty-five people, had a servicing portfolio in excess of $500 million, and had a

capital position of more than $5 million (CUSO 2006). The success of CUSO Mortgage

has contributed to Maine Savings success and has allowed the institution to grow into a

full-service financial institution. Maine Savings now offers a full menu of products and

services, while at the same time, providing superior customer service. The company now

employs more than eighty people and offers a diverse and competitive line of traditional,

as well as non-traditional (e-commerce) financial products and solutions.

Leadership at Maine Savings

Maine Savings is very fortunate to have one of the most experienced and professional

Senior Management teams in the industry. In addition to Anthony L. Emerson, the Vice

President of Finance/Accounting/Operations, there are four other members of the Senior

Staff at Maine Savings. John C. Reed is the President and CEO. John brings with him

more than twenty-five years of professional banking experience, with the last sixteen

leading Maine Savings as its CEO. Robert G. Carmichael is the Vice President of Human

Resources & Training, a retired United States Army Brigadier General, and brings with

him more than twenty-five years of HR, training and development experience. Rick

Moore is the Vice President of Lending. Rick has been with Maine Savings for more than

twenty years and has occupied various positions, beginning as a Teller in the Milo branch

in 1986. Dave Sayers is the new Vice President of Retail Operations. Dave joined Maine

Savings in January of 2007 and brings with him more than twenty years of professional

banking experience. The Maine Savings Senior Staff is recognized by its peers and the

188


industry as educated, conscientious and professional. Members of the Senior Staff serve

on a variety of state and national boards and are contacted for their professional input

regularly on a myriad of issues.

Employee Satisfaction at Maine Savings


The management at Maine Savings understands that they have a major influence on

employees and their behaviors and attitudes. For this reason, the management team

operates as transparently as possible, and strives to communicate frequently and honestly

with its employees. Management strives to take responsibility for their actions and

deliver on promises and commitments to employees. There are several methods used to

convey information and strategy to the employees at Maine Savings. Among them are:

regular departmental staff meetings, regular communication to all employees by the

CEO, an employee newsletter (Appendix 7), and the use of working groups to solve

problems or address operational issues at the company. Management at the firm truly has

an open door policy and are available and approachable by the employees in not only

theory, but practice as well. The Senior Staff of the institution strives to engage

employees at every level for input and opinions that may affect them or their work.

Things have not always worked this well from a management perspective, and the current

management team uses these lessons as a barometer for current behavior and attitude. In

the past, the organization has had to deal with senior management ineptness, Senior Staff

infighting, and the perception that management was a “closed” society. Shortly before

189


John Reed was hired as the CEO, the institution had to deal with a CEO that ran the firm

for his own interests, with no regard for employees or customers. For a short period of

time, members of the Senior Staff would visibly air their grievances in front of

employees and openly take sides and play favorites between each other’s employees.

This proved to be counterproductive and had a devastating effect on employee

productivity and morale. When Anthony Emerson arrived in 2003, several long time

employees informed him that the situation had gotten so bad that they were literally

weeks away from leaving the company. The current Senior Staff has addressed these

issues, and the changes have been recognized and happily accepted by the employees of

the institution. Today, leadership and selflessness is promoted over self-interests and turf

wars.

Leadership at Maine Savings is not to be exhibited by just those in senior management.

Employees are empowered to make decisions regarding their jobs, and are asked for input

on their own development and leadership potential. The Senior Staff at Maine Savings

uses the same approach that Jack Welch used at General Electric, the 70, 20, 10 employee

rating system. Each year, the Senior Staff goes on a secluded retreat for the purpose of

conducting a strategic planning session and rating every employee in the company as a

ten-percenter, twenty-percenter, or a seventy-percenter. Each member of executive

management is asked to give their input based on the employee’s performance and

proclivity for advancement. Those employees that are identified in the bottom ten percent

of performing employees are evaluated to see whether or not they can improve their

performance, or have to be terminated. Those employees that rank in the top twenty

190


percent are identified and slated for added responsibilities and potential leadership

positions within the company.

Work Environment

The management at Maine Savings understands that one of the single most important

contributing factors to employee satisfaction is their work environment. As a result, the

organization operates as a “flat” organization for operations purposes. Everyone and

every job are respected and a sense of community has been created by management and

the Board of Directors. Employees are given the tools necessary to excel at their jobs,

including adequate workspace and an open, inviting physical work area. Employees have

access to the best that modern technology has to offer from new computers at every

workstation, to new fax machines and copiers, to new VOIP (Voice Over Internet

Protocol) phones, to a brand new state of the art data processing system. Managers and

supervisors are very quick to respond to work environment issues and concerns that

employees may voice, as these issues are commonly given top priority. Departmental and

branch budgets at the firm include financial provisions for items that may be needed

throughout the year to improve an employee’s work environment.

Maine Savings goes to great lengths to ensure a proper work environment for their

employees, and includes such considerations as: adequate lighting, ergonomic work

stations, anti-fatigue mats for the Tellers, and the use of professional design concept

teams. The organization invests much planning and attention to any employee workplace,

in order to ensure that it will lead to a satisfactory work environment for the employee.

191


As this paper has previously stated, the company is required to have a third party auditor

workplace review on an annual basis as part of its yearly renewal of the disability

insurance. Auditors from Maine Mutual Insurance Company engage in employee

interviews and physical inspections as part of the auditing process. At the current time,

the company is adding new staff at a rapid rate and finding it necessary to be innovative

with space for employees to work. However, management recognizes the importance of

physical workspace to employees and strives to provide one, under even the most

difficult of situations.

Maine Savings is a very sought after employer in any geographic region that they operate

in. The main reasons for this are that the organization is known for its professional,

supportive, and collaborative attitudes towards its employees. The firm offers peak time

employment opportunities where applicable, and exhibits an attitude of flexibility with its

employees whenever appropriate to do so. The company recently initiated a PTO (Paid

Time Off) plan to allow for more employee flexibility with their earned personal time.

Now, instead of having separate pools for sick, vacation, and personal time, it is all in one

category and the employee is free to use it however and whenever they would like (based

on the prior approval of management). Because the organization currently has three retail

branches that require being open on Saturdays, a flexible workforce is necessary in order

to adequately staff these operations. The Branch Managers of these facilities are

empowered to be creative and flexible with their schedules in order to provide adequate

coverage at all times. Because of this, employees have the opportunity for more time off

in one short period and get added flexibility with their regular schedules.

192


Hostile work environments that include: offensive language, lude acts, suggestive

remarks, racially motivated comments, gossip, and the like, are completely forbidden at

Maine Savings. This directive comes from the top and is understood by every employee

and is constantly monitored by management. If a situation occurs where an employee has

created a hostile environment, the issue will be resolved immediately. As an example, in

2004 Anthony Emerson had an administrative employee that was spoken to several times

in regard to demeaning gossip that they were overheard spreading. Mr. Emerson spoke to

this person’s supervisor and directed that a personal counseling session take place

regarding the matter. Shortly thereafter, a second incident involving the same employee

took place. Mr. Emerson personally met with this employee and their supervisor and

issued a written warning to the employee. In less than three weeks, another similar

incident occurred with the same employee. At that time, Mr. Emerson terminated the

employment of this employee from Maine Savings. This is an example of the attitudes, as

well as actions, toward those that contribute to a hostile work environment at the

organization.

Overall, Maine Savings does an admirable job of providing a productive, tolerant, and

supportive work environment for its employees. The one area of improvement the

company could focus on is in their branches. Because the senior management team is

based at the corporate office in Hampden, Maine, less attention is sometimes paid to

outlying branches. In some cases, employees at the branches may be working with

slightly older technology, have poorer lighting, older furniture, and have older facilities.

193


The Senior Staff has recognized this and has recently begun to formulate a plan to

improve the work environments at some of the branches. Management has recently

authorized computer upgrades, provided new telephones, installed new carpets and paint,

and even provided branch employees with exercise equipment (the main office has a

fitness facility that branches do not). With this current focus on the employees of its

branches, the company will soon be able to upgrade the work environments of all of its

employees, no matter their location.

Employee Training/Programs

Employee training and formal training programs are an area that Maine Savings has

improved upon drastically in the past three years. Prior to 2004, the company had no

formalized training program and offered training to its employees in a sporadic and

diffused manner. Because there was no formal process or procedure in place, many

employees were trained differently and to different standards, based on what branch they

were working in at the time they were hired. In January of 2004 however, the CEO John

Reed, hired Brigadier General Robert G. Carmichael as the Vice President of Human

Resources & Training, a newly created position. Rob quickly put his many years of

professional training and development experience to work by formalizing a company-

wide training program and creating a mini “Maine Savings University.” In addition to

creating formalized training programs, Rob completed an analysis of every position at the

company and ascertained the job requirements and knowledge required for each position.

In addition to creating targeted training for specific jobs, Rob also created a “wow-

service” training program for every employee at the organization.

194


In the past three years, under the direct guidance of Rob Carmichael, the institution has

created a myriad of formal training programs, much along the lines of what Jack Welch

created at General Electric. When an employee starts at Maine Savings, no matter their

position within the company, they are introduced to a “WOW” service training as part of

their in processing. Each employee watches the “Give ‘em the Pickle” video about

catering to customers, watches a video about the “Phish” philosophy that was cultivated

at Pike Place Fish market, and is given reading material about “Knock your socks off

service.” By doing this, every employee receives a uniform induction into the customer-

centric methods and ideas of the organization. This helps the employee to understand the

importance of customer service at Maine Savings, and that the company puts top priority

on delivering world-class customer service. This initial training is followed up on

regularly throughout the year when employees attend refresher training on customer

service, by attending seminars at the main office. These seminars are designed by the

Vice President of Human Resources & Training and are conducted by him and the CEO,

John Reed. By doing this the company is sending the powerful message that this is an

important consideration, and also that the very highest of management believes in the

philosophy and expects that great customer service will be delivered.

Above and beyond the initial customer service training that every employee receives,

formal training programs have been designed for each functional area of the company.

For example, an employee hired as a Teller would go through the “WOW” customer

service training, then receive one-on-one teller training (in a training environment) from

195


an experienced & knowledgeable trainer, then be put into a live training environment

with a training coach by their side, and finally, they would be assigned to their work

station with a name tag delineating them as a Trainee, until such time that they could

perform the job with adequate and acceptable competence. By doing this, the

organization has been able to standardize the performance of many of its employees, and

as a consequence, improve organizational performance.

Before the company had any formal training or hiring, the task of hiring and training was

a decentralized process that led to a diffusion of standardization, as well as many

different practices being done for the same task on a company-wide basis. In the past, an

employee was hired into one of the branches and subsequently trained by that branch.

This resulted in a lack of best practices and the main office having to deal with and

understand the many different methods being deployed on an issue by the many outlying

branches. During this time, there were no standardized training standards, no formal

training procedures, and no verifiable documentation of training on a company-wide

basis. This proved to cause problems when employees needed to work in other branches

for one reason or another. In many cases, it was soon learned that certain procedures were

totally different from one branch to another, albeit within the same company. A

formalized training program, with regular feedback and documentation has been a

welcomed solution to this former problem.

Any important and worthwhile endeavor in an organization must be both publicly

supported by the executive management team and be adequately funded in order to have

196


the slightest chance of success. At Maine Savings, HR & Training now has a robust and

ample budget that is used to continue to improve training and development issues at the

company. As proof of this, in order to show a commitment to continued training and

feedback to employees, one of the largest single organizational expenses in the budget is

for training. It is a large five-figure budget expense for the “service shopping” program.

This initiative is very much like the standard “mystery shopping” programs that take

place at many retailers, with the exception that Maine Savings’ management sets the

scoring criteria. This program provides a good, objective critique of how the training at

Maine Savings is being manifest in its employees when they actually interact with a

customer. This is only one concrete example of the financial commitment that the

organization has made in order to ensure the success of its training programs.

Maine Savings’ training programs have recently been put to the test, as it prepares to

open two new branches that require approximately twenty new employees. Because of

the processes and procedures that have been established, the training of all new

employees was an overwhelming success. After these new employees made their way to

a Training Coach at an established branch and had the opportunity to perform for a short

period of time, the resultant feedback was overwhelmingly positive. In the words of the

Milo Branch Manager Jeff Gahagan (a 30 year industry professional), “I cannot believe

how well prepared and informed the new employees are to do their jobs well and provide

top notch customer service.” This feedback is one of many measuring tools that the

organization can use to gauge the effectiveness of its training programs. In addition to the

feedback received by the existing employees and their supervisors and managers, the new

197


employees also gave the training department resoundingly positive feedback in regard to

their level of preparedness after they had been in the job for a few weeks.

The training methods used at Maine Savings have also changed over the last three years.

In the past, employees may have been sent off-site to attend a generic training program

with a general description. Now, the company uses webinars, videos, onsite consultants,

professional seminars, and if necessary, travel to another destination for appropriate and

pertinent training. With continued improvements in technology, the company tries to take

advantage of as much cost effective, easy-delivery training content as possible. If an

employee is permitted to travel off-site for training, it is required that they write a

synopsis of the training that they received and review it with both their immediate

supervisor and the V.P. of Human Resources & Training, in order to assess the benefits

of the training. This sort of assessment and constant evaluation of training programs is

leading the company to develop “best practices” in the area of training. This will allow

the company to maximize its efficiency in delivering training to its employees in the

future.

The last topic that deserves to be mentioned in regard to Maine Savings’ training

programs is the relationship between effective training and employee satisfaction and

turnover. The organization has one of the lowest turnover ratios in the country (for its

peer group), much of which can be attributed to the investment in training the company

has made in its people. Employees are encouraged to ask for more training when they feel

that it is necessary. The company realizes that training is an investment, and looks upon

198


the endeavor as actively investing in the betterment of its workforce. As this paper

previously stated, “Unless an organization aligns their corporate training to

organizational goals, any returns that are realized from the training investment will be by

chance alone.” Maine Savings definitely understands this concept and has made training

part of its strategic business plan, and has funded it accordingly.

Employee Development & Leadership Planning

In addition to training its employees for their specific jobs and initiating them all into the

customer-centric atmosphere at Maine Savings, the company also strives to develop

future managers and leaders. As this paper discussed in the “Leadership – Management

Attitude/Response” section, the Senior Staff of the organization routinely rates its

employees on the basis of 70%, 20%, or 10%, adopting the rating scheme used by Jack

Welch at General Electric. The 20% category is where the top performing employees are

in terms of their ability to be mentored and groomed for future leadership opportunities.

Although the Senior Staff discusses everyone in the company once per year as a group,

each senior Staff person is responsible for evaluating the employees in their departments

on an ongoing basis throughout the year.

In the past, when someone in a supervisory position left the company, management

would either promote the next person in line within the department, or was forced to hire

an outsider for the position. With its new leadership development strategy, the

organization has pre-identified people from all over the company that are capable of

being promoted into many different positions as the need arises. As an example, when the

199


organization announced the opening of its two new branches, it received interest from

many current employees, several of which were previously identified as having the

potential for leadership positions. As a result, the company was able to promote qualified

people into supervisory positions that had experience with the institution already.

Because of this, the company is able to promote deserving people, instill a greater sense

of employee satisfaction, and prevent the “brain drain” experienced so often by other

institutions in the same geographic area.

As a result of its recent successes with leadership development, the company has added a

section to its annual employee appraisal form (Appendix 8) so that the topic can be

discussed with every employee in the organization. This serves a two-fold purpose. First,

it allows an employee to be proactive in discussing their wishes or desires in receiving

further development toward a position of greater responsibility. Second, it allows

members of Senior Staff the opportunity to assess whether or not an employee possesses

the desire or intention to progress into a position of leadership. Because of the importance

of promoting leadership qualities in all of its employees, whether or not the employee has

any intention of ever ascending to management, the company uses other methods to allow

leadership qualities to be honed. For example, Maine Savings has many informal

committees (annual party, Christmas party, employee newsletter, etc.) that are made up of

employees from many areas of the company. Everyone is given an opportunity to lead

these committees and take on added responsibilities as a result of the initiatives created

by the participants. This method has proven invaluable at giving most employees in the

organization the opportunity to experience leadership at some level.

200


Employee Satisfaction and Recognition

Employee satisfaction and recognition is an area that Maine Savings has placed a special

emphasis on in the past two years, and continues to make a priority. The results of

Hawthorne Studies that were conducted by Elton Mayo from 1924 to 1932 are still valid

today. These studies concluded, in part, that money was not solely responsible for

employee motivation and satisfaction, but rather employer behaviors and attitudes toward

employees played a large role in this. In addition to this study, is the hierarchy of needs

theory presented by A.H. Maslow, that says that as basic needs are satisfied, higher levels

of needs emerge and motivates an employee’s behavior. Maine Savings management

understands these hypotheses, which is exhibited by the offering of a very robust benefits

package (Appendix 9) to every employee, that consists of fully paid employee health

benefits, dental coverage, life insurance, a 401K plan with employer matching and profit

sharing bonus, a Christmas bonus, Thanksgiving turkey, and a longevity bonus, just to

name a few. Maine Savings is well recognized in the industry and geographic area for its

generous employee benefits.

One new, never before achieved initiative that management recently concluded was the

completion of an employee survey (Appendix 10). The survey was totally confidential

and asked employees to rate items such as: work environment, benefits packages, their

immediate supervisors, the executive management team, the equity of their compensation

package, and their overall attitudes toward the organization. In addition to the fifty or so

stated questions, employees were provided the opportunity to give any other feedback, or

201


comments that they may deem appropriate. The results of the survey were tallied and

reviewed by the Senior Staff of Maine Savings. The next step management took was to

address some of the concerns noted in the survey by making any changes that were

appropriate, based on the employee feedback and recommendations. After this step was

taken, all of the employees in the organization were provided with the results of the

survey (Appendix 11), including the comments, and management’s answer to any

concerns or recommended changes. This step alone has engendered a large volume of

employee satisfaction. There were numerous comments from the employees in the vein

that it was nice to see that management cared about what they thought and actually made

changes based upon their direct input.

An element of employee satisfaction that was waning until the current management team

was installed was a formal employee recognition program. Prior to the establishment of

the current recognition program, employees were lauded on a sporadic basis, at best. In

the past two years, the company has taken the steps necessary to establish a formal

recognition program that include: recognition in the quarterly employee newsletter (The

Quarterly Compass), honorable mention in the monthly Maine Savings Customer

newsletter (Appendix 12), the Cecil C. Porter award for outstanding achievement

(Appendix 13), and formal recognition for training program completion. Management has

seen a very positive result from these initiatives, and garnered an overwhelming amount

of positive feedback from employees and customers alike. The recognition programs are

working as desired by building employee esteem, reinforcing desired behaviors,

motivating performance, and supporting the mission and values of the company. Because

202


of these positive results, management will continue to find new ways to bolster and

improve the current recognition program.

Another important step the company has taken is to highlight their employees in industry-

wide or trade publications whenever possible. Not only does this improve employee

morale and satisfaction, but also highlights Maine Savings as a desirable place to work.

This hypothesis was proven correct just recently when the organization advertised for the

many new positions at its two new branches. The company was literally inundated with

applications and resumes from the local competition. During the interview process, most

prospective candidates told the company that they were familiar with the great working

conditions at the firm and had seen at least one article touting the accomplishments of the

organizations employees. In almost every case, the candidates expressed dissatisfaction

with their current work environment and employer. The candidates voiced their desire to

work for a company like Maine Savings that has invested in their employees and

highlights their successes whenever possible.

As is the case for all of the items in the company’s strategic business plan that

management feels are necessary to the success of the company, so too is the recognition

program adequately funded and budgeted for each year. For the fiscal year 2007, the

recognition budget is larger than ever before in the history of the company (Maine

Savings Budget 2007). The Senior Staff has made the decision to begin formally

recognizing an employee for their accomplishments at most company events. For

example, the organization has an annual company party and an annual meeting. At the

203


company party, an award will be given to the employee who most supported the effort to

open the company’s two newest branches. At the annual meeting, the Cecil C. Porter

award for outstanding service will be awarded to the employee who best exemplified

“WOW” customer service. In both cases, the employee receives a plaque and is

recognized both at the event and also in the newsletter. Awards such as these have

become very competitive and also very desirable, as well as being looked upon by all

employees with respect and admiration. With very few exceptions, most of the

organizations employees will tell you that garnering an award and being recognized

publicly for their work is a major motivating factor in their performance and level of

satisfaction with the company itself.

In addition to the corporate-wide, more formal and recognized programs, management is

also in the process of encouraging informal recognition at lower levels in the company,

such as the departmental or branch levels. For example, in the institutions Brewer branch,

every Friday afternoon the Branch Manager buys an ice cream sundae for the employee

who has gone “above and beyond” in their performance for that week. Although it seems

like a small gesture, the Branch Manager indicates that the program is very competitive

and that employees work hard all week to be the winner. This sort of friendly competition

has served to raise the level of awareness in job performance, customer service, and

overall satisfaction with the employees’ jobs at the company. The organization has many

of these informal recognition programs that help perpetuate the morale and productivity

of its employees, and because of this, will continue the practice and look for more ways

to accomplish this.

204



Over the past three years, Maine Savings has been able to effectively transform itself

from a vertically integrated, top-down, information flow process to a more flat,

horizontally integrated organization, for the purposes of information sharing with

employees. For example, in the past, rather than explaining to employees what the goals

were, how they were to be achieved and why, a manager would simply give employees

tasks without explaining the reasons behind them. This type of management behavior

results in the employee only concentrating on the task itself, without having an

understanding of how it may fit into the larger, more strategic plan. For this reason,

management now actively shares elements of the strategic plan or other endeavors with

its employees, fully stating the goals, purposes, and processes by which to accomplish

them. By doing this, the employee understands why they are doing what they are doing,

and can also take ownership of their process toward accomplishing the desired end result.

The Senior Staff firmly believes that everyone in the organization should understand

what the goals of the organization are, and what measures will be taken to accomplish

them. Staff meetings in all departments are frequent and one-on-one meetings with mid-

level managers and supervisors and a member of Senior Staff are expected. These

meetings serve to maintain an open line of communication between executive

management and employees, as well as serve to allow employees to offer their feedback

to management. To this end, many members of the Senior Staff have trained their

managers and supervisors on the best ways to conduct meetings. Rather than be

205


unilateral, the meetings should be bilateral and take on a participative quality. This will

engender more open and honest input from employees and allow them to feel that they

are part of the solution and a valued asset to the company.

One way that the company has been able to use this strategy in order to accomplish a

strategic goal, is by allowing employees at all levels the opportunity to have input during

the implementation and planning stages. For example, in January of 2006, the

organization underwent a very arduous demand processing conversion. Knowing that

there was a goal of implementing this within a certain time frame, management asked for

volunteers to join an implementation committee to solicit employee input and feedback.

The Committee was comprised of employees from many different functional areas and

included all levels of employees, from a Teller to a member of Senior Staff. During the

implementation-planning phase, the employees were integral in helping to design a

successful implementation strategy. According to the software vendor that coordinated

the conversion, they had never before seen the kind of cooperation and understanding of

the process than they did at Maine Savings. As a result of employee involvement from

the beginning, the conversion went smoothly and was considered to have been very

successful, by any standard.

Employees at Maine Savings are not seen by management as robots employed there only

to perform assigned tasks, but as valuable assets with important opinions and ideas. The

organization stresses a collaborative work environment and constantly looks for ways to

promote and facilitate this initiative. When there are issues to be solved, status or level of

206


position does not matter. Every employee must work with each other to solve the

problem and ultimately make the banking experience better for the customer.

Management constantly stresses the fact that employees need to focus on two different

types of customers, the internal customer and the external customer. The concept that the

organization exists solely because of external customers is reinforced on a daily basis. So

too is the concept of the internal customer, or all of the other fellow employees that rely

on each other to do their jobs effectively. When problems between employees do arise,

they are addressed in an expedient manner, and with the understanding that internal

customer service is just as important as external customer service.

The Board of directors and the executive management team at Maine Savings truly feel

that all of the employees at the organization are important stakeholders in the company.

As is the case in most organizations, the employees at Maine Savings are one of the

largest groups of stakeholders in the organization. For this reason, it is essential that the

employees understand the goals, purpose, mission, and objectives of the organization. To

this end, when executive management sought to create new mission and vision statements

in 2005, the input of employees was sought. The process began with Senior Staff

members drafting an outline of what these statements should contain, then “roughing” up

a first draft statement for each. Then, the statements were given to employee groups to

critique and offer input and feedback on the statements. The statements were then refined

based on the employees’ feedback and made final. These statements are now prominently

displayed in every public and employee area throughout the company.

207


Communicating with Employees

There is no greater concern at Maine Savings than effective communication. This means

with customers, vendors, co-workers, and employees alike. The organization goes to

great lengths to promote accurate and effective communication, including providing

employees specific training on effective communication techniques. Management of the

organization believes firmly that the success of the institution rests on the ability of its

employees and management team to communicate effectively. Employees are trained that

communication is not just verbal, but can include gestures, tones, body language, e-mail,

and physical barriers. Employees expect communication from Senior Management, as

well as the opportunity to communicate with Senior Management. The management

realizes that effective communication is necessary for a positive and productive work

environment, and work toward that goal accordingly.

The company experienced periods of turmoil in the past that the current management

team has attributed to a lack of appropriate communication. Specifically, employees felt

as though that when they were spoken to by certain members of management that they

were not getting the whole story, or that things were being blamed on someone else. This

left many employees lacking trust or credibility in their management team. In addition, as

was the case with a certain member of Senior Staff that is no longer at the organization,

there was a deep seeded feeling that this person would often take credit for the positive

actions and ideas of their employees, but deflect any responsibility for negative actions or

results. As Jack Welch stated in his book Winning, “leaders also establish trust by giving

credit where credit is due. They never score off their own people by stealing an idea and

208


claiming it as their own. Trust happens when leaders are transparent, candid, and keep

their word. It’s that simple” (Welch 2005). The current management team at Maine

Savings has seen how this type of errant behavior can eat at the fabric of trust and ruin

communication at an organization. Therefore, they maintain a constant line of open and

honest communication with all of their employees.

Often times in an organization the size of Maine Savings, employees will have differing

opinions, or in some cases air strong opinions to one another that create animosity and

have to be addressed by a member of management. More often than not, the management

of the company finds that it is not necessarily the message itself, but rather how the

message was communicated and subsequently received. In a majority of the instances, e-

mail is the culprit. For example, a Branch Manager e-mailed the A.V.P. of Operations in

regard to a compliance issue that the A.V.P. of Operations had sent a memo out on two

days prior. The Branch Manager’s e-mail was all in “caps”, bolded, and was a statement

that ended with a question mark. When the message was received by the A.V.P., she took

it to be a challenge to her directive, as well as an inference that she was wrong. Because

of this, she responded back to the Branch Manager with a scolding e-mail asking why this

was being questioned. In the end, it was learned that the Branch Manager only wanted to

make sure that he was communicating the right message to his employees.

The current management team at Maine Savings is dealing very effectively with

communication issues by addressing them immediately, honestly, and comprehensively.

The management at the organization conveys to its employees the need to solve their

209


problems at the lowest possible level, but to use the correct organizational

communications path when necessary. In many cases, employees are able to solve their

own communication issues if given the opportunity and empowered to do so.

Management at Maine Savings reinforces the belief that their employees are capable of

solving their own problems if they communicate with one another. When an issue is

elevated to a member of management, one of the first strategies is to analyze the steps

that were taken in the process prior to elevating the issue to a member of management.

By doing this, the employees learn what steps may have been taken in order to solve the

problem at the lowest possible level. Management is able to encourage this behavior by

not punishing or criticizing responsible, proactive communication. This promotes healthy

communication and allows for an open, positive environment for the employees to

communicate in.

A point that Maine Savings’ management stresses on a continual basis is the fact that

communication, whether it is between co-workers, management, or customers, is the

foundation for the company’s success. In meeting after meeting, the management of the

organization talks about the need to effectively communicate in order to grow and

prosper as an organization. When the Senior Staff meets at it’s regularly scheduled

Wednesday staff meeting, the CEO makes it a priority to ask each Senior Staff member

about the communication in their departments and if there are any issues that need to be

addressed. By the top levels of management making communication within the

organization an important priority, attention to this priority flows down and permeates the

entire work force. Because every employee in the organization understands the

210


importance and attention of effective communication to the top-level management, they

know they are enabled to provide input and feedback when they deem it necessary.

Specific examples of the successes that open and effective communication has at the

organization will be highlighted in more detail in the next section of the paper that

considers effectiveness of teamwork at Maine Savings.

Employee Satisfaction and Teamwork at Maine Savings

Maine Savings has made great strides and improved in many of the areas associated with

employee satisfaction but arguably, their most notable improvement is in the area of

teamwork. Much of this success can be attributed to the facilitation skills and abilities of

its Vice President of Human resources & Training, Robert Carmichael. Rob has

introduced team building and a team problem solving approach to the employees of the

organization. This has proven to instill a sense of camaraderie and team spirit between

employees in different departments from around the organization. Those employees who

have had the opportunity to work in teams, not only find themselves more motivated to

work toward a resolution, but also find satisfaction in working side by side with a co-

worker from another part of the company. Maine Savings now uses teams extensively for

trouble-shooting, problem resolution, and project planning initiatives.

Before the installation of the current management team, team formation within the

organization was rare to non-existent. However, in the recent past, team resolution has

had a very positive effect on several different areas of the organization. One example in

particular, relates to the management of the company’s Visa portfolio. Shortly after the

211


arrival of Anthony Emerson, the Vice President of Finance/Accounting/Operations, who

is responsible for the Cards Services Department, he began to notice the high volume of

negatively toned e-mails between the supervisor of the department and the branches.

With the help of Rob Carmichael and the Card Services Supervisor, Jan Rollins, a cross-

functional team including Jan, the A.V.P. of Operations, Rob, and a representative from

each branch was convened. It was soon learned that the branches did not understand the

compliance issues related to managing the portfolio, and Jan did not realize the

magnitude of the customer impact and the issues the branch had to deal with when face-

to-face with a customer demanding that their card issue be dealt with. After meeting for

three months on a regular basis, the members of the team all had a much better

understanding of each other’s concerns, but also came up with some new operating

procedures that were helpful to all parties involved. The results of the work of this team

have been totally positive! Communication has improved, the branches routinely involve

Jan in their decisions and any issues that may arise are quickly dealt with to the

satisfaction of all parties.

The organization faces many different issues such as product offerings, systems

implementation, and compliance issues that have a wholesale effect on many different

areas of the company. The standard operating procedure of the company now is to

convene a team from the different affected areas so that everyone has an opportunity to

give input and feedback on an issue that may affect them and their respective

departments. This has recently been done with the following company initiatives: DP

conversion, telephone conversion, courtesy pay program, ATM deployment, product

212


implementation, and exam and audit preparation. In each of these cases, the initiatives

were implemented successfully and with the support of every department in the company.

When an announcement goes out now for volunteers to sit on a cross-functional team,

more employees respond than can be accommodated on the team.

There is no doubt that the implementation of teamwork at Maine Savings has proven

successful in improving employee satisfaction and left team members feeling more

empowered as a result of the experience (empowerment will be discussed in the next

section of this paper). The company has realized an increased level of employee

motivation and productivity as a result of using teamwork on a regular basis. The biggest

improvement the company has seen as a result of teamwork has been the increased

cooperation between employees in the organization. This cooperation has translated into

better working relationships between both employees and departments. A beneficial by-

product of teamwork at Maine Savings has been the improved ability by many of the

company’s employees to generally work and associate better with other employees.


In the previous analysis regarding employee empowerment in this paper, it was stated

“Empowerment in the workplace is an often misunderstood concept. Employee

empowerment is a term that many managers and organizations think they understand, but

few actually do, and even fewer really put into practice. Many managers feel that by

empowering employees, they relinquish the responsibility to lead and control the

organization.” This statement aptly describes the general feeling of Maine Savings

213


management before the installation of its current management team. Prior to the assembly

of the organization’s current senior management team, most, if not all, decisions of any

significance had to be made by a senior manager. Employees were conditioned not to

make decisions and therefore, not to act on anything without the prior consent of

someone in management that was duly authorized to make the decision. This created an

atmosphere of uncertainty and contributed to a lack of self-assuredness among employees

at the organization.

Maine Savings current senior management team has reversed this prior belief that all-

important decisions should be made by a member of management. In fact, the Senior

Staff reinforces their belief that problems should be solved at the lowest possible level of

the organization, whenever possible. As was previously stated, from an operational

standpoint, the company operates as a flat organization. This means that decisions are

made at the level that they occur and not based on a hierarchal structure. By doing this,

the company has urged their employees to take more ownership of their duties and

responsibilities, as well as encouraged employees to become more entrepreneurial in

nature. As this new concept has been permeated all ranks of employees at the company,

Maine Savings has seen a marked improvement in employee satisfaction, customer

retention, and employee retention alike.

As is the case with employees at the Ritz-Carlton organization, the employees at Maine

Savings are empowered to solve customer issues whenever appropriate, keeping in mind

that there are certain restrictions due to government compliance regulations. That

214


notwithstanding, employees learn as they go, that they are able to reach outside of their

paradigm at times in order to facilitate better customer service or solve an issue for a

customer. This process is not instantaneous right after the employee is hired, but rather is

a process of maturation and learning the appropriate boundaries in which to operate. In

addition, employees are encouraged to bounce ideas off of fellow co-workers as a

solution, rather than going right to management. Collective reasoning as part of the

empowerment process is encouraged, and even rewarded by the Senior Staff of the

organization. Management understands the concept of “corporate entrepreneurship” and

also understands the necessity to constantly encourage it and reward it.

There are many examples of employee empowerment present at Maine Savings.

However, a good illustrative example exists in regard to fees. Like any other financial

institution, Maine Savings has a very detailed fee structure that applies to things like an

overdrawn account to an ACH wire fee. These fees have been established, published, and

are applied in the appropriate and relevant circumstances. From time to time though, a

Maine Savings employee will refund the fee to the customer because they feel that the

circumstances surrounding the fee assessment was not appropriate, or they felt it needed

to be reversed for some reason. As long as these situations are appropriate and do not

occur on a regular basis, they are encouraged, both from a customer service standpoint,

but also an employee empowerment standpoint. As an illustration of past practice, a fee

could not be refunded without prior management approval. Today, employees that are

working directly with the customer can make the instant decision to reverse the fee.

Customers are happy that they are working with an employee that can make decisions

215


and employees are motivated and satisfied because they have been empowered to make

decisions.

For the past three years, the results of the organization’s employee satisfaction survey

indicated that employee empowerment was very important to both employee satisfaction

and also employee productivity. The employees indicated that they take pride in their

work and would like to have more autonomy in making decisions that effect their

department or specific job. In employee appraisal sessions employees voice their support

for added decision-making capability. When employees are empowered to make their

own decisions, they have a sense of being trusted, which in turn results in more trust of

the management of the organization. This has been the result at Maine Savings as well.

Employees voice their increased levels of trust in management in appraisal sessions and

on the employee satisfaction survey. The feedback from the mid-level managers is also

very strong and indicates the increased employee satisfaction level with the growing

ability of employees to make empowered decisions.

A by-product of actively promoting employee empowerment at the organization is the

more efficient use of time by department managers and supervisors. The company has

found that the more empowered employees become, the more productive they are and the

more proactive they will work. In addition, the managers and supervisors are realizing

that they too can be more productive because they do not have to involve themselves in

decisions that the front line employees are now empowered to deal with. Effective

empowerment means that all parties are winning, the employees, the management, and

216


most important of all, the customers. This is important to note because in customer

satisfaction surveys, customers continually voice their desire to deal with an employee

that can take care of their issue without having to make them wait for a decision from

someone higher up in the company.

The Senior Staff has seen a marked improvement in employee development as

empowerment has been made a priority. Empowerment has created learning opportunities

for many employees that have led them to want to learn more so that they may be better

prepared to make similar decisions in the future. Likewise, senior management now

promotes empowerment on a regular basis as a source of knowledge and experience.

Once in awhile an employee will not make the right decision. When this happens,

management understands the importance of using the situation as a training opportunity,

rather than a platform for punitive action. Maine Savings Senior Staff teaches managers

and supervisors that the quickest way to cease innovation and creativity is to punish it.

They know that people will make mistakes, but that should be the time to review the

situation and make sure it does not happen again rather than punish an employee that is

trying to do the right thing.


An issue that the current management team identified in the first employee satisfaction

survey was that an inordinate number of employees felt they were spoken to by members

of management in a disrespectful way. There was an overall tone in a couple of

departments that management was unapproachable because of the way that they spoke to

217


employees. This feeling was manifesting itself in a distrust of management, as well as

lowered employee satisfaction and motivation. Employees gave examples that included

offering their input on an issue and then being chided or spoken to in a demeaning manor

regarding their input. This kind of behavior by management was eating at the fabric

employee trust and morale. When the current management team realized that this was in

fact an issue, they took immediate steps to engage employees in productive discussions

on the topic and put a stop to the behavior immediately.

At Maine Savings today, all employees are spoken to and treated with respect and

dignity. Employees are frequently asked for their input and encouraged to give

management open and honest feedback, without the fear of retribution. As is the case in

any organization, situations do arise where someone speaks to another in less than a

respectful manner. When these situations arise, they are dealt with expediently and

addressed at the highest levels of the company. It is also understood that everyone is

allowed to have a bad day. As long as those bad days do not become consistent and have

an adverse effect on the other employees of the organization, there are usually no

problems. The Senior Management team at Maine Savings stresses the importance of

being empathetic when communicating.

An example of the limits management will go to in order to ensure a truly interactive

working environment for its employees can be found in the following example: in May of

2005, the A.V.P. of Operations informed Anthony Emerson, the V.P. of

Finance/Accounting/Operations, that an employee had called from one of the branches to

218


say that an Operations Clerk had hung up on him. Mr. Emerson subsequently spoke to the

Operations Clerk to ascertain what had happened. The clerk informed Mr. Emerson that

she indeed hung up on the branch employee because she did not like what he said,

although she admitted he was not at all rude. She was told that her behavior was not

acceptable and that it was not to occur again. Within approximately 45 days, the same

situation occurred again. Mr. Emerson, along with the clerk’s direct supervisor, spoke to

her again and this time put her on probation. Less than fourteen days later, the same

complaint came from a different branch. When Mr. Emerson was informed of this, he

promptly terminated the employment of the clerk and asked her to leave the building.

Management stresses the necessity for all employees to interact with one another in a

respectful manner, and those that don’t must be prepared to work somewhere else.

A different example in regard to empathetic interaction at Maine Savings can be found in

the following example: An Accounting Clerk, who had been employed with the

organization for eleven years and who had an acceptable performance history began to

show up late for work and make excessive errors in her work. After identifying these

issues and tracking them for a period of approximately two months, without the behavior

changing, the employee was asked to sit down with their direct supervisor to discuss the

matter. In the meeting the employee just stated that they had some personal problems and

would work to resolve them so that they could improve their work. The employee

apologized for their performance and was summarily dismissed back to her work area.

Another month went by and her work did not get better; it actually got worse. At this

point, Mr. Emerson asked to speak to the employee and her direct supervisor. Initially the

219


employee was reluctant to divulge the real issue, but after being assured by Mr. Emerson

that they were all there to solve the problem, she did talk. In her case, her daughter’s day

care hours were changed to 8:00 a.m., the time she had to be at work. Therefore, she was

always late because she could not drop her child off before eight. This caused her to

worry about getting in trouble and led to a degradation in her work quality. As a solution

to the problem, Mr. Emerson changed the employee’s work hours to begin at 8:30,

instead of the normal 8:00. By doing this, the company was able to address the emotional

needs of the employee, while at the same time gaining a satisfied and more productive

employee in the process.

Because Maine Savings is a retail financial institution, it must maintain certain hours and

be accessible to the public at stated times. Because of this, flexibility is not always an

option. When it is though, the company will do what it can to address the needs of its

employees. Another program that the company offers to address the emotional needs of

its employees is a very robust ERP (Employee Response Program). This program

provides for 24-hour phone contact for the purposes of crisis management or

psychological help of any kind. This benefit is paid for at the company’s expense and is

available to all employees upon their hiring at the organization. The service is completely

anonymous and the company’s management never knows how many employees are using

it, let alone who is using it. The management however, has received feedback from

certain employees that this is an invaluable benefit that has been able to address certain

employee needs.

220


Whenever there are a great number of people working in one area for many hours at a

time, there is bound to be conflict at some point or another. At Maine Savings, these

conflicts are addressed and facilitated by Rob Carmichael, the V.P. of Human Resources

& Training. Rob is a Certified Facilitator and has dealt with conflict resolution

professionally for more than twenty years. If a situation cannot be solved at the lowest

possible level between the employees, Rob gets involved and holds a formal conflict

resolution session. In this session he addresses the issue, confronts the parties, and finds

an equitable and fair solution to the conflict. This procedure has worked for the past three

years and has proven to be effective at settling conflict once and for all. Rob will also be

called upon from time to time to act as a mediator between parties, whether it is between

two staff employees or between a member of management and a staff employee.

Sometimes the issue is not even between employees; it may be an interpretation of a

procedure that different parties are unable to agree on. Rob is able to bring the parties

together and have them effectively come to an agreement on the correct mode of action to

take in order to resolve the issue.

The Senior Staff at Maine Savings is a proponent of smooth and efficient employee

interaction and they go to great lengths to ensure that this is the case. Although the

organization communicates as a “flat” organization, boundaries are still observed and

respected. Employees are encouraged to interact with one another, but also be mindful of

their respective situations and deal with each other respectfully. As part of the company’s

ongoing training, interpersonal skills and employee interaction in general, are covered

with all employees. Those employees at the supervisory and management levels of the

221


company receive more in-depth training and even mentoring on the subject of employee

interaction. Because this topic receives so much attention from the Senior Staff and is

publicly addressed frequently, the organization can boast of having and maintaining good

interaction between employees.

Organizational Culture/Employee Focused

Many of the elements that contribute to employee satisfaction at Maine Savings have

been discussed previously in this paper. However, none of the elements would be able to

exist and work at maximum expectation without a fertile and congenial organizational

culture in which to thrive. An abundance of research on this topic has identified the fact

that organizational culture is directly linked to service quality and employee performance.

It makes no difference if such elements as communication, interaction, training, and

service are talked about in an organization unless there exists a culture that allows these

elements to be cultivated and nurtured. The Senior Management team at Maine Savings

understands this and works tirelessly to ensure that such a culture exists. There are

numerous examples, several of which have already been discussed, that show how

serious management is about maintaining an organizational culture that allows for

maximum employee satisfaction, maximum customer satisfaction, and subsequent

organizational profitability.

It is not enough to talk about creating an employee culture; it requires actions on behalf

of the management team in order to set the example and prove a commitment to the

initiative. Some of the challenges that have recently faced the management team at Maine

222


Savings in regard to organizational culture are directly related to the organization’s recent

expansion. Two challenging results of this expansion included hiring 25% more

employees, and the quick assimilation into the Maine Savings organizational culture.

These new employees make up one in every four of the company’s current employee

base, and therefore have quite an effect on the attitudes and temperament of the

organization. Management addressed these issues by ensuring a comprehensive induction

into the organizational culture climate before the employees were assigned to their final

work areas. In addition, the new employees were assigned to long-time employees, acting

as trainers that could help reinforce the important elements of the company’s culture to

the new employees. This has resulted in a very good initial understanding by the newer

employees of the kind of culture that exists at the company.

The Senior Staff at Maine Savings is keenly aware that an appropriate and conducive

culture is the responsibility of an organization’s leaders and results start at the top. The

company devotes a great deal of time, energy, and money to the development of its

employees, as well as to the promotion of its ideals in order to ensure their workforce is

engaged and receptive to the desired culture. The CEO of Maine Savings has stated that it

is not enough to focus just on the operational issues of the company alone. Employees

must be considered in any operational issue. Employees at Maine Savings are considered

an integral part of the machine that powers the company forward, and the culture that is

being created takes this into consideration. The Management knows that without good

leadership and an appropriate example, a culture that promotes employee satisfaction is

223


realistically unattainable. It is for this reason that leadership by example and constantly

putting attention on elements that create the appropriate culture are stressed.

Although establishing an organizational culture that is conducive to employee satisfaction

is most effective when exhibited by the leadership, it does not mean that employees

should not have input into the process. This paper has discussed several of the ways that

Maine Savings has been able to effectively collect and implement the ideas of its

employees. An important element of creating this culture of satisfaction for the managers

of the company is to do what they promise to do. In addition, as with the employee

survey, it is important for managers to address issues that are brought to their attention by

employees. By doing this, management establishes a sense of trust and commitment from

the employees that is an integral part of establishing, maintaining, and growing employee

satisfaction. As is the case at Maine Savings, if employees see that management is taking

a proactive approach to creating an organizational culture that promotes employee

satisfaction, they will be more motivated to contribute and support these endeavors.

Maintaining high morale is a key factor in creating an atmosphere of employee

satisfaction at most organizations and Maine Savings is no different. Managers are tasked

with the responsibility to constantly assess the level of morale that exists in their

departments. Low morale can cause many problems that include low productivity, poor

customer service, bad attitudes, and a general sense of malaise in the organization. When

a situation like this occurs at Maine Savings, it is quickly dealt with, rather than left to

“work itself out.” Management at the organization is very proactive in this area and

224


enlists the help of all employees in order to monitor employee morale. Department level

management is empowered to rectify any situation that is having an adverse effect on

morale and ensure that they do what they can so that the situation will not re-occur in the

future.

Maine Savings is currently in the process of identifying operational functions that have

traditionally needed prior higher-level management in order to accomplish. Management

recognizes that in many cases, the organization’s productivity has suffered due to

employees having to seek the approval of senior management in order to act. Even

though management has been able to identify several areas in which employees can now,

through empowerment, act in order to save time and improve customer service, it is

proving to be more difficult than first thought. The reason for this is that employees are

reluctant to switch from a culture that was controlled by dominant managers that would

insist on being notified every time a decision needed to be made. The employees are

having a difficult time making these decisions even though they have been told that they

are now empowered to do so, knowing that mistakes will be made in the process and

current management will not impugn them for doing so.

This last example highlights a point that deserves further attention, and is also relevant to

the organizational culture at Maine Savings. Establishing an appropriate organizational

culture that promotes employee satisfaction is neither an easy process, nor an expedient

process, as Maine Savings has learned. Sometimes, it may take years to establish the right

culture and have all of the employees understand and buy into it. Just because the senior

225


management of an organization makes a decree of some kind or dictates that this will

happen immediately, does not mean that it will happen. Establishing an organizational

culture takes time and is something that lasts, whether it is good or bad. When Jack

Welch, the former CEO of General Electric, was asked about the most important aspects

of the many mergers and buy-outs he led while at the helm of GE, he stated very simply,

“the organizational culture considerations.” In Mr. Welch’s opinion, any operations,

finances, or other business challenges could be overcome, but organizational culture

could not. Citing the few failed takeovers that he was involved with, he specifically said

that the initiatives failed because of a clash in organizational culture.

These experiences help to highlight not only the importance of establishing the desired

organizational culture, but also the fact that organizational cultures can be entrenched and

very difficult to change, even with a proactive management team driving the change. At

Maine Savings, the initiative to change the organizational culture began more than three

years ago. However, management admits today that the desired changes are still in their

embryonic stages and will take much more time to solidify and be accepted by all of the

employees. Ironically, as Maine Savings has realized, it is the long-time, more

experienced employees that are proving to be the impediment to change in many cases.

Even though the recommended changes have come as a result of employee feedback and

would result in added employee satisfaction, it is proving a daunting task to actually

change the behavior of seasoned and experienced employees. An element that is

compounding this for Maine Savings is the fact that the tenure for their average employee

exceeds more than ten years of experience with the organization. Because the company

226


has very little turnover, and has had since its inception in the early sixties, it has an

established, experienced employee base. While this proves to be helpful operationally, it

also is proving to be an impediment to change.

Before the arrival of Rob Carmichael as the Vice President of Human Resources &

Training in 2004, there was no formalized and centralized human resources function

within the organization. This made it very hard to consider, as well as act like, a human

resource focused organization. The absence of this very important Senior Staff position

left Maine Savings without the important structural support for the advocacy of human

resources & training functions within the company. With the establishment of this very

visible position, coupled with the hiring of such a well-recognized professional in the

industry, the organization was able to finally establish the formal distribution of work

roles and functions that are a necessary element for establishing the desired

organizational culture. Maine Savings has definitely seen an improvement in the

satisfaction of its employees, and also continued progress in its goal to make their

organizational culture one that promotes added employee satisfaction.

The company has made a commitment to constantly improving their organizational

culture, but at the same time, management understands the necessity to constantly

monitor the situation and be an example of the desired result. The Senior Staff

understands the importance of setting the appropriate example for their employees and

constantly being the example for what they are striving to attain. The last thing that

management wants to be identified with is hypocrisy. Trust is an important element in

227


any corporate initiative, but especially important in establishing an appropriate

organizational culture. Although the organization’s management is constantly assessing

the progress of this initiative, they understand that this initiative is ongoing and have

planned for another twenty-four months until all of the desired results have been attained.

Employee Benefits

Many of the benefits that Maine Savings offers have been discussed previously in this

paper. In this section however, a more comprehensive analysis of the benefits and their

corresponding contribution to increased employee satisfaction will be considered.

Because Maine Savings is a full-service financial institution located in very heavily

banked areas, competition for experienced, quality employees is very high. It is not

uncommon for qualified financial institution employees to change institutions every

twelve to twenty-four months because of a better offer from a competitor. For this reason,

a competitive, robust, and comprehensive employee benefits package is a necessity in

order to compete in the employment market place. Maine Savings is recognized by its

competitors and prospective employees alike, as having a very good benefits package that

is oriented to and for the employees of the organization. Management has continued to

offer this kind of robust benefits package even as costs and expenses associated with

benefits have continued to rise. A strategic decision has been made by the organization to

continue to support the current levels of benefits offered, rather than cut expenses and

increase profitability at the expense of employee benefits.

228


The management of Maine Savings understands that lower level employees in particular,

may have to sustain an inordinate financial burden while trying to provide themselves

and their families with adequate healthcare, for example. In addition to healthcare, there

are other benefits such as life insurance, retirement benefits, vacation time, sick time,

flextime, and other employee benefits. Each year, management accomplishes a

comprehensive review of its benefits package that includes a cost analysis, a competitor

analysis, and a content analysis in order to ensure that the organization is providing the

most comprehensive benefits possible to its employees, at a reasonable price, and that the

benefits exceed those of its competitors. In addition to this review, the company also asks

prospective employees about their current benefits packages during the interview process.

They also do an exit interview when an employee leaves the company that includes

questions about the benefits package. All of this is done in order to effectively understand

how the organization’s benefits package is affecting employee satisfaction.

The company has been able to differentiate itself from the competition in several

different areas regarding employee benefits. The first of which, and probably the most

recognizable, is the fact that the company provides healthcare benefits to the employee at

no cost. Beyond that, there is a small premium to cover the employee and children and a

somewhat higher premium for the employee and their entire family. To point out the

magnitude of this benefit, the cost of covering the employee alone is approximately $900

per month. The cost of covering an employee and their family is approximately $1,900

per month, of which Maine Savings pays $1,300, a sizeable benefit by any organizational

standard. Many of the organization’s main competitors in the local area have recently

229


increased the employee’s portion of healthcare expense, while at the same time, reducing

benefits available to the employees. For instance, there are currently no competitors in

the area that pay the entire cost of healthcare benefits for the employee like Maine

Savings does.

Although this paper made mention of the importance of the organization’s benefits

package in a previous section, it bears repeating here. Recently the company needed to

hire approximately twenty-five new employees for its two new branches. During the

interview process, the prospective candidates all stated that their current organization was

in the process of cutting available benefits, while at the same time increasing costs for the

employees. They all expressed interests in attaining benefits offered by Maine Savings

and could not believe the extent to which management at the organization went to in

order to provide affordable and comprehensive benefits to its employees. In almost every

case, these candidates expressed their feeling that Maine Savings was their employer of

choice in large part because of the benefits package that employees received.

For the reasons stated in this, as well as other sections of this paper, Maine Savings

management understands that its benefits package is important for employee motivation,

retention, and overall satisfaction. The Senior Staff has made a commitment to keep the

current benefit offerings available to employees as long as it remains financially viable to

do so. As costs rise and insurance companies continue to modify plans and discontinue

certain benefits, this commitment is becoming more difficult to uphold. However, the

company will continue to devote the time and effort necessary to ensure that the best

230


benefits package possible continues to be offered to its employees. This year (2007) for

example, the company’s current medical insurer Aetna, offered a 10% premium increase.

Management was able to modify some of the coverages in the plan that would have little

or no effect on the employees and realize a cost savings of 1%. This kind of attention and

negotiation allows the organization to continue to offer their menu of benefits and not

have to increase employee premiums. This is communicated to the employees of Maine

Savings and results in increased loyalty, appreciation and overall employee satisfaction.

Employee Motivation

Motivation is one way of explaining why people behave the way they do in

organizations. A person’s motivation can come from intrinsic or extrinsic sources.

Intrinsically motivated behaviors are actions performed for their own sake, doing

something because it’s believed to be important. “Extrinsically motivated behavior

includes actions that are performed to acquire material or social rewards or to avoid

punishment; the source of the motivation is the consequences of the behavior” (Daniel

and Metcalf 2005). Maine Savings management team strives to promote both intrinsic

and extrinsic motivational behavior in its employees. They do this by hiring people that

have a level of intrinsic motivation, like a person that enjoys helping customers, and by

providing an atmosphere, benefits, and other motivators, in order to promote extrinsic

motivation. Because there are many factors associated with both forms of motivation, the

management team must take into consideration and constantly monitor such things as

personal characteristics, the type of job the employee is being asked to do, the

organizational culture, and the organization’s support system. Many of these motivators

231


have been discussed in previous sections. This section will consider more specific ways

being used at Maine Savings in order to ensure intrinsic motivation, and at the same time,

encourage extrinsic motivation.

In general, the Senior Staff at Maine Savings understands that before certain behaviors

can be motivated externally, there are basic needs that need to be met first. This line of

thinking would mirror the findings and research of Abraham Maslow, commonly referred

to as Maslow’s Hierarchy of Needs, and whose works and research have been covered

previously in this paper. This hierarchy of needs identifies five levels of need that include

physiological needs, the lowest, to self-actualization needs, the highest priority. Because

of these beliefs and an understanding of Maslow’s theories, Maine Savings management

provides benefits that include medical, dental, retirement, flextime schedules, and above

average pay that address an employee’s basic physiological needs. As these needs are

met, only then can bonuses, raises, and other motivational tools be effective at attaining

desired behaviors from employees. By applying this logic to the basic fundamentals of

psychological motivation, Maine Savings management has been able to design effective

motivation programs that deliver desired results.

An example of how Maine Savings used motivation in order to achieve an increase in

loans can be found in their NASCAR auto loan program that began in 2006. Before this

program was launched, the company averaged approximately $1,000,000 in auto loans

per month. The promotion contained certain bonuses and incentives based on volume,

that would be paid to the lenders generating the most business (Appendix 14). In the first

232


month of the promotion, auto loan production doubled and continued to increase from

that point for the following six months. In one day at the company’s Brewer branch, more

than $1,000,000 in auto loans was done as part of the promotion and grand opening of the

branch. The promotion surpassed the goals set for the special and resulted in increased

employee productivity and exponential motivation because of the incentives and bonuses

that were paid as a result of the promotion.

Maine Savings management realizes that it is because they have met their employees’

most basic physiological needs that they are able to use added compensation as an

effective motivator. Above and beyond using monetary forms of motivation, management

strives to maintain a very high level of morale and camaraderie in order to maintain a

high level of motivation. The organization does this in many ways including constant

informal recognition, buying lunch for the staff, spending time with employees where

they work, and by members of management being approachable and available to every

employee, no matter what their title or job function is. Employee surveys indicate that

management’s methods are working. Especially noteworthy are the comments from long-

time employees that indicate a total shift (for the positive) in the levels of motivation that

they feel. In almost every case, the employees at Maine Savings say that they feel both

challenged and positively motivated. The Senior Staff recognizes this and takes constant,

proactive steps to ensure that it stays that way.

233


Chapter 8

Customer Service, Loyalty and Retention at Maine Savings

This section of the paper will follow the same format as previous sections and will

consider the elements of customer satisfaction that are being addressed at Maine Savings.

Each element related to customer satisfaction and loyalty will be comprehensively

examined and analyzed through the Maine Savings lens. One of the organization’s main

goals has been to become a truly “customer-centric” company. To this end, they have

taken many steps and started many new initiatives that will be analyzed here in relation to

their customer service strategy. In addition to analyzing the operational endeavors of the

organization as they relate to customer service initiatives, many examples will be cited in

order highlight certain strategies and methods the company has used. The Senior Staff of

the organization understands completely that Maine Savings is a service business that

without satisfied and loyal customers would cease to exist. Therefore, customer-centricity

is stressed and even mandated by management of the company.

Maine Savings as a Customer-Centric Organization

Being customer-centric is not only a goal for Maine Savings, but also an actual necessity

to continue as a going concern in business. The commidization of money has for all

practical purposes, served to make almost all financial institutions generic in most cases.

That is to say, money costs or is paid for at a standardized rate that is available at any

financial institution. What can make an institution stick out and result in added market

share is the degree to which they provide an unforgettable service experience to their

234


customer base. In today’s market, consumers that do not even care about face-to-face

customer service can do their banking on the Internet. This used to be a small niche

market reserved for the technologically adept. However, today banking via the Internet

accounts for a large percentage of all financial transactions. That having been said, there

are elements of customer service associated with online banking products, of which most

lead right back to a friendly, knowledgeable, and responsive employee. Maine Savings

has been able to be the fastest growing institution of its kind in the state of Maine because

it recognizes the importance of being a customer-centric organization.

Not unlike many businesses today, Maine Savings has had to re-examine the way it does

business in every respect. Rather than the traditional method of focusing on profitability

and operations first, the organization has examined every one of its processes from the

perspective of its customers. Many times, this has resulted in wholesale and costly

changes, but met the needs and expectations of the customers that use the service. A good

example of this can be found in the organizations weekend hours available at three of its

branches. Many competitors are not open on weekends, but a few have half-day hours on

Saturday. Maine Savings received a great deal of feedback from their customers that all

day Saturday hours were a desire. Recognizing this, as well as responding to the desires

of their customers, the organization established all day, full-service hours at three of its

centrally located branches. By no means will this be a moneymaking proposition for quite

awhile, but the positive response from its customer base has been overwhelming. In the

minds of the company’s Senior Staff, being customer-centric means not always making

235


decisions that result in immediate profitability, but rather what is good from the

customer’s point of view.

It is not enough for an organization to just say they will become customer-centric; they

must have a plan that includes funding, a strategy, and a timetable for implementation.

One of the first initiatives Maine Savings invested in, as a method of benchmarking and

measurement was a service-shopping program. This program uses actual Maine Savings

customers to secretly shop each branch and the organization’s electronic services in order

to rate different categories related to serving the customer. Such items as reliability,

responsiveness, assurance, and empathy are all evaluated using a scale of one to five

(Appendix 15). These items are further broken down into customer service elements such

as customer name use, product offerings, action, and alternative choice. The company

began this initiative in 2005 and took the entire year of 2006 in order to establish a solid

baseline from which to measure in the future. The report not only measures performance

specific to Maine Savings, but also for geographic peers and national peers. By seeing the

peer performance, the organization can seek out best practices if they notice a lagging

indicator for any prolonged period of time.

Part of becoming a truly customer-centric organization is the ability to think like a

customer and anticipate their needs and wants. Maine Savings has created a customer

users group in order to constantly assess the needs of their customers. In many cases,

customers may not even know they would benefit from a certain financial product. This

users group helps to identify these issues and proactively informs the organization’s

236


customers of products that may be of benefit to them. The company also is constantly

assessing the service channels of the organization and striving to improve the speed,

efficiency, and overall quality in order to bolster customer satisfaction. Maine Savings

strives to create value in every customer interaction no matter how brief or insignificant it

may seem. Management understands the necessity to literally exist for the customer in

order to truly be customer-centric.


Customer acquisition and brand management are particularly important to Maine Savings

because of the high level of competition in the financial services industry that exists in

their marketplace. Not only does competition exist in the form of a physical competitor,

but also from financial services organizations on the Internet. This inordinately high level

of competition has resulted in a constant barrage of advertising and promotions that has

left the consumer almost immune to effective acquisition and branding attempts. This has

caused Maine Savings to become very strategic in the way that they market their services

and products to potential customers in the marketplace. The organization has stayed away

from the traditional white wash methods of advertising that include such mediums as

television, radio, and newspapers. Although the company does use these outlets from

time to time, it relies more on strategic alliances with well-known entities and robust

promotions that create brand recognition. Some of these alliances and promotions will be

examined in the following section of this paper.

237


One of the more stark and important examples of a Maine Savings initiative in regard to

branding can be found in the organization’s name change that took effect in 2001. Maine

Savings was originally founded for the employees of the Bangor & Aroostook Railroad

Company and was given the acronym name of BARCO (Bangor & Aroostook Co.). This

name served the organization well until the 1990’s when a number of better-known

competitors moved into the market. It was apparent to the CEO John Reed, that most

people did not associate the name BARCO with a financial institution. To make matters

worse, the Bangor & Aroostook Railroad Company went bankrupt and was not an

existing business entity any longer. Because of this, Mr. Reed recommended to the Board

of Directors that the name be changed to Maine Savings, which was shortly thereafter

executed. The organization now enjoys statewide recognition as a top performing

financial institution. The Maine Savings brand is well know throughout the state and

often sought after because of reputation and name recognition.

Maine Savings is attempting to set itself apart from the competition by aligning itself

with other well-known, highly recognized brands that already enjoy customer recognition

and engender a spirit of loyalty. The best example of this can be found in the

organization’s recent marketing agreement with the University of Maine athletics

department. Maine Savings just recently signed a multi-year marketing agreement with

the athletics department that makes it the “preferred financial institution” of Black Bear

sports. In a state like Maine, where there are no professional sports teams, university

athletics is a very visible and viable marketing tool. The Maine hockey team is a

perennial national powerhouse that sells out every home game and garners a high rate of

238


national television coverage, which in turn results in a great deal of exposure. In an effort

to capitalize on this exposure, the organization, through its newly signed marketing

agreement, is able to prominently display its logo, in conjunction with the Black Bear

logo, in many highly populated areas. Maine Savings has signage on their skybox at

Alfond Arena, signage behind each goal at the Alfond, signage behind both benches at

the Alfond, an ATM in the lobby of the Alfond, and markets University of Maine

clothing and merchandise at many of their branches. This effort has resulted in high

visibility and added exposure for the organization, which in turn is resulting in customer

growth.

The primary reason for Maine Savings signing the marketing agreement is to increase the

organizations exposure, and thereby increase its brand identity and awareness to current

and potential customers. This strategic decision by the organization is proving successful

in this regard. Every time the Maine Black Bear hockey team plays, a sold out arena of

6,000 plus fans and a television audience potentially numbering in the hundreds of

thousands is able to see the Maine Savings logo numerous times during the game. In

addition, the company sponsors different segments of the game so that in addition to

seeing the company’s logo, a person also hears the company name. In terms of raw

statistics, the alliance with the University should prove to be very lucrative. The

University has more than 12,000 current students, but has hundreds of thousands of

alumni. In the state of Maine, alumni and students alike are fiercely loyal to the

University and its affiliate products. This was the primary reason that management

239


decided the strategic marketing agreement would prove to be beneficial for the

organization.

The management of Maine Savings strives to create a unique brand recognition

experience for the customer that distinguishes itself from the rest of the competition in

the financial services industry. Many of the organizations competitors spend literally

hundreds of thousands of dollars per year touting their services, rates, accessibility, and

products. However, they all sound the same and none of them offer anything of distinct

value or benefit. Maine Savings’ Senior Staff invests much time and effort to ensure that

their organization does not fall into the same trap. The customer acquisition and brand

management endeavors that the organization undertakes need to be unique in nature and

in some way, differentiate the company from its competitors. The agreement with the

University of Maine athletics department is a good example of this. Another example can

be found in the proprietary products that Maine Savings is able to offer to their

customers. For example, the organization recently developed a proprietary municipal

banking product as a result of many inquiries from municipalities in the geographic area.

The product, “Maine Savings Municipal Banking Services Program,” is unique to Maine

Savings and is rapidly becoming recognized by municipalities as a product of choice for

them. Although many other financial institutions in the area offer banking services to

municipalities, none have bundled an attractive, convenient, and cost effective set of

products and services as Maine Savings has done. This uniqueness and ability to

customize proprietary products and services is quickly resulting in added brand

recognition and increased customer acquisition.

240


In the very recent past, it was not uncommon to find a customer that maintained several

accounts at several different institutions for a variety of reasons. In these cases, brand

identity is quickly eroded, as the customer feels the need to maintain these different

accounts in order to satisfy different and particular needs. Maine Savings is aggressively

attempting to establish their brand as being synonymous with “full-service”

comprehensive banking products and services. This branding effort is proving successful

at acquiring customers who had previously maintained different accounts at many

different institutions. The organization is doing this by building its brand around

consumer, business, and electronic product and service offerings. The name “Maine

Savings” is rapidly coming to be known in the financial services marketplace as a one

stop, full service financial institution of choice.

Maine Savings Customer Acquisition and the Internet

Typically, customer acquisition via the use of the Internet is reserved for national or large

regional companies that can be accessed and viewed by large populations accessing a

well known website. In the case of Maine Savings, it would be of no use to attempt

acquiring customers by advertising on such websites as Amazon.com or Ebay. This does

not mean however, that the organization cannot effectively use the Internet as a customer

acquisition tool. The organization has been able to accomplish by advertising and

maintaining a strong presence on the websites of large, well known, local organizations.

The University of Maine website is the most important example of this. In addition to the

University website, the company also maintains a presence on the websites of Liberty

241


Check Systems and CUSO Mortgage Corporation. These are related vendor sites that

serve to provide Maine Savings with exposure, but that also point potential customers to

Maine Savings own website for the purpose of procuring products and services.

Another area where the company has been successful at customer acquisition by using

the Internet is with business customers. Business customers are a market unto themselves

with specific and many times, unique requirements. For this reason, they are always

looking for better services and products. Recognizing this, Maine Savings has created a

“Commercial (business)” section on its website. This section is tailored specifically for

business and commercial customers. This section of the website delineates the

organization’s commercial products and services, as well as the pricing and benefits of

using Maine Savings for these services. Maine Savings has been able to realize an

increase in commercial customer acquisition as a result of this comprehensive

information available on its website. Management has taken the time to listen to the

needs and desires of its commercial customers and as a result, been able to address these

on the company’s website in a comprehensive manner. The organization is constantly

updating this section of its website in order to be proactive to the wishes of its

commercial customer base, as well as potential commercial customers.

Target Marketing at Maine Savings

Maine Savings engages in a variety of target marketing activities, of which the

aforementioned commercial services initiative is one of them. The organization is

fortunate enough to have many large SEG’s (Select Employee Groups) from large

242


companies in its operating area that provide a target marketing opportunity. A good

example of this is the institution’s relationship with the Jackson Laboratories in Bar

Harbor, Maine. The JAX Lab, as it is commonly referred to, employs approximately

2,000 people, most of which are not from Maine and many of which have unique

financial needs. Some of these needs include customized student loans, foreign wire

services, flexible card services, and non-standard loan parameters. Because of these

needs, Maine Savings designed a program for the JAX Lab employees and markets these

services and products directly to them. The offerings are so specifically tailored that they

would not apply to any other potential customer base. This target marketing has resulted

in the acquisition of greater than ninety percent of the entire JAX Lab employee base.

An area that the organization has focused on in regard to target marketing for customer

acquisition is related to acquisition through product differentiation, rather than through

customer differentiation. Traditionally, target marketing refers to identifying a potential

customer base and marketing to them accordingly. In the case of Maine Savings, they

have identified certain product groups such as mortgages, insurance, and financial

planning as the apex for target marketing. That is to say, potential customers seeking

these products create a target marketing opportunity because of their specific product

needs. As the potential customer contacts the organization in relation to one of these

products or services, they are then marketed to based upon their need at the time. This

type of target marketing has resulted in customer and product growth for Maine Savings.

Once the specific need of the customer has been met, an entire relationship encompassing

all of their financial service needs can then be established.

243


Delivering World-Class Customer Service at Maine Savings

As this paper has addressed previously, money and the services associated with managing

money and finance has become a commodity. In essence, there are very few differences

that exist between products and services offered by most financial services companies

today. What is different however, is the level of service provided by these institutions

while delivering the products and services required by the customer. Delivering world-

class customer service is no longer a choice, but a determining factor in the going

concern of a business, especially an industry so inundated with competition as the

financial services industry. This fact is especially pertinent in the case of Maine Savings.

The overall levels of competition have been discussed previously, but the company’s

Ellsworth branch provides a stark and pertinent example of just how crowded the

marketplace for financial services companies is. Within one mile of Maine Saving’s

Ellsworth branch, there are nine other financial institutions, many of them far more

established with a longer tenure in the area than Maine Savings, that all provide savings

accounts, checking accounts, mortgages, commercial services, credit cards, and a variety

of other financial services. What is it then that can set Maine Savings apart from these

other institutions in order to become the customers’ PFI (Primary Financial Institution)?

Maine Savings’ management understands that this differentiator must be the delivery of

world-class service.

Providing world-class customer service is at the nexus of everything that is done at Maine

Savings. Every employee understands that the only way for Maine Savings to effectively

compete in the marketplace and continue to grow is by providing its customers with the

244


best possible customer service. In order to continue to provide world-class service, the

management of the organization is continually looking for industry best practices to

implement in order to bolster their level of customer service delivery. This is exhibited by

the attendance of the CEO, John Reed and the Vice President of Human Resources &

Training, Robert Carmichael at the Disney Customer Service Training Institute in

February 2007. There are several steps involved in delivering world-class service that

include defining “world-class”, training, setting expectations, follow-up, and constantly

reviewing a customer service program. These steps will be examined in greater detail in

the following analysis. It should be noted however, that Maine Savings Senior Executive

Staff has made a commitment to world-class service delivery and continues to invest both

time and money toward ensuring the success of this endeavor.

Training for Customer Service at Maine Savings

The financial services industry is much like any other service industry, whereas in most

cases, it is the lowest paid, least experienced employees that are an organization’s direct

interface to the customer. Maine Savings is no exception. Their Tellers, who are the least

experienced as a whole, as well as the lowest compensated employees, are the face of the

company to customers of the organization. For this reason, it is vital that these employees

especially, be adequately trained on the different ways to deliver proper and meaningful

customer service. To ensure that all employees receive proper customer service training,

a formalized customer service-training program has been established at the company.

Every employee, no matter what their position within the organization, is required to

attend the initial customer service training as part of their employment orientation. Front-

245


line employees like Tellers and Customer Service Representatives are required to attend

more progressive customer service training classes on a regular basis throughout the year.

These training sessions are designed by Robert Carmichael, the Vice President of Human

Resources & Training and incorporate many industry “best practices” theories and

methods.

Maine Savings management constantly reinforces their belief that there is no substitute

for lifelong, ongoing customer service training. Many employees come to the

organization with ample amounts of previous customer service training, but Maine

Savings insists on continuing customer service training in any case. In addition to their

proprietary training programs, the organization uses other resources such as the state

trade organization or customer service training programs sponsored by the national trade

association. The company also participates in professional development seminars from

time to time, as they are warranted. The biggest difference the company has made in

recent years is to highlight the importance and priority of customer service training.

Management has set training expectations and follows up on the results to ensure that the

expected outcome of the training has taken place. Because employees know this, they

take the initiative to strive to enhance their customer service skills through training and

development opportunities whenever possible.

A recent initiative in regard to customer service training at the organization that has

proven very successful is the use of a customer service-training employee. This model

leverages the particular customer service skills of an employee who has routinely

246


excelled at delivering customer service by using them to teach other employees. In one

particular case, a former Teller that constantly exceeded the expectations for customer

service is now used to teach customer service skills in a one-on-one setting. This strategy

has proven to be very effective, as well as cost efficient. Many employees that have had

the benefit of this training offer positive feedback as to the effectiveness of this training.

The Managers in the branches also provide positive feedback in regard to the employee’s

performance after they assimilate back into the branches after having received this

particular training. Because of the success of this training model, the organization is

currently designing similar training programs in regard to other topics.

Important Elements of Customer Service That are Highlighted at Maine Savings

Maine Savings’ management attempts to take a comprehensive view of the customer

service experience. However, certain very important elements are highlighted as part of

the process. Together, these elements provide for a solid foundation for delivering the

best possible customer service at Maine Savings. The organization has received a large

volume of feedback from new customers that indicates positive word of mouth in regard

to certain elements of customer service delivery are responsible for their patronage at the

organization. Although this is not a comprehensive list, these elements do represent the

major elements that are important to a customer that perceives a satisfying customer

service experience.

Be Accessible – Maine Savings customers expect, justifiably so, that they will have

access to employees for questions and concerns, whether on the phone or in person. This

247


element of customer service is constantly emphasized at Maine Savings. An effective

strategy will set the stage and define minimum levels of accessibility for customer access.

The expectations of accessibility are defined and taught to all employees of the

organization. Employees understand that they can never be too busy to be accessible to

customers. Maine Savings management considers and makes investments in the

infrastructure that are necessary to provide accessible customer service. This may mean

the addition of more people, redesigning physical facilities, or changing the hours of

operation for the organization. It is understood by everyone in the organization, from the

CEO on down, that whatever the initiative, the goal should be to allow for the maximum

accessibility possible for the customer.

Be Reliable – Reliability means keeping the promise you made to the customer and

doing what you say you will do for the customer. Where this is concerned at Maine

Savings, there is no higher priority than doing what one says they will do. Employees

understand that promises are not only made directly and verbally, but through a myriad of

delivery paths in various forms. The organization may make direct promises to customers

through advertising and marketing materials, in company correspondence and contracts,

and in service guarantees and policies published for everyone to see. In addition to these,

customers of the organization hold the company to indirect commitments – promises that

customers believe are implied in the way the company talks about itself, its products, and

its services. The Senior Staff at Maine Savings constantly reinforces the belief that not

keeping promises is one of the quickest ways to create a disgruntled, former customer.

248


Display the Right Attitude – The training that employees at Maine Savings receive

teach them that a person’s attitude colors the way they react to customers because it has a

direct effect on what they hear and how they respond. It is not realistic to believe that

everyone will be enthusiastic and have a great attitude all of the time, but employees at

the organization are given that as a goal. Management reinforces the concept that if there

are factors at work that are affecting an employee’s attitude, they should be discussed and

resolved as soon as possible. Customers can and will sense this and will react and form

opinions based on the attitudes of the employees that they encounter. Displaying the right

attitude is important for everyone in the organization in pursuing an atmosphere that

promotes great customer service.

Accept Responsibility – Everyone makes mistakes. Mistakes by Maine Savings

employees will happen. The key to rectifying a mistake is to be honest with the customer

and to accept responsibility. Employees are taught that a mistake that is dealt with in a

responsible manner, with a positive outcome, is nothing more than a good learning

experience. The absolute best way to establish a sterling reputation as an organization is

to be prepared to take responsibility for whatever decision you make. It is a matter of

integrity, and it will earn you the respect of both the employees and customers of the

organization (Scott 2001). Accepting responsibility also means being a team player and

providing service to the customer on behalf of the entire organization. There can be no

“it’s not my job.” The key to accepting responsibility at Maine Savings is that all

employees must view themselves as being part of a bigger team, and all working toward

249


the common goal of serving the customer. Pointing fingers or laying blame on another

department or person is not tolerated, for any reason.

Be Responsive – Employees at Maine Savings understand that timeliness is always an

important part of delivering great customer service. The organization’s customers expect

expedient resolutions to their questions and problems. A great example of the

responsiveness of Maine Savings employees can be found in the company’s cards

services department. On a regular basis, VISA sends the organization alerts that a certain

string of cards has potentially been compromised. In this case, Maine Savings takes the

proactive approach of personally calling each customer to discuss the issue and the

resolution to the potential problem. Over and over again, customers respond very

favorably to this proactive response and send letters of thank to the organization’s

management staff. The company sees their responsiveness as a competitive advantage,

where they can react more expediently than their competition. If Maine Savings is unable

to be as responsive as their competitors, they understand that they run the risk of

delivering undesirable customer service, or at worst, losing customers to the competition.

Be Empathetic – Employees at Maine Savings are taught to deal with each customer and

their particular situation as distinct and separate from another. Being empathetic toward

customers shows them that the organization cares about their situation and is willing to

take the steps necessary to resolve their problem. Employees are encouraged to take time

to listen to customer concerns, and take actions that shows the company cares.

Employees are taught that to be truly empathetic with a customer an employee should put

250


himself/herself in the position of the customer. Recognizing the customers’ emotional

state helps an organization figure out the best way to effectively provide them the service

that they are looking for. This is the ultimate goal of each Maine Savings employee when

dealing with a customer

Be There For The Customer – “Being there for the customer” is a phrase that is

borrowed from the ‘FISH” philosophy and the customer service experience at Pike Place

Fish Market in Seattle, Washington. Maine Savings believes in the FISH philosophy and

uses many of the experiences from Pike’s in their training. In many ways, “being there”

is the culmination of all of the previous elements mentioned. However, it is also a state of

mind. It means that you are present at that time, at that moment, for the customer and his

or her needs take precedents over any other function. How much do you actually get done

when you are in one place thinking about a different place? Why not commit to being in

one place at one time? When you are present, not dwelling on what happened in the past

or worried about what may happen in the future, you are fully attuned to opportunities

that develop and to the needs of the people you encounter. Customers react positively

when they are fully engaged by the employees of an organization that they feel are there

for them.

Monitor Achievement – Measuring the effectiveness of Maine Savings customer service

delivery initiatives is a major priority of the Senior Staff of the organization.

Measurement is both the last and first step in producing superior service. Measuring

elements of the service profit chain provides an overall indication of how an organization

251


is doing, particularly on dimensions important to the business such as customer service. It

is important that the methods of measurement be understood and consistent from period

to period. Maine Savings has instituted several new measurement tools to constantly

assess their achievement in regard to customer service delivery. Among these tools are

customer surveys, service shopping results, comment cards, and new customer referrals.

An important element of monitoring achievement is the ability to effectively share the

results with all of the organization’s employees. Maine Savings compiles reports and

statistics regarding customer service levels on a monthly basis. Each month, the Senior

Staff of the company analyzes the results and examines the overall performance of the

organization. The information is then shared with department managers and reviewed

with the departmental employees.

The Employee-Customer Relationship at Maine Savings

As this paper previously addressed and analyzed, an abundance of research has shown a

positive correlation between employee attitudes and customer satisfaction. When

employees and customers connect, beyond just a superficial transaction, customers gain a

sense of importance and caring that leads to enhanced customer satisfaction and long-

time customer loyalty. Maine Savings takes several important steps in order to ensure the

best possible employee-customer relationship. Among these are ensuring that employees

that interact with customers are themselves satisfied and display the best attitude

possible, using the customers name when addressing the customer, and conversing with

the customer about more than just their transaction when possible. Employees at the

company are taught that each and every customer interface is an opportunity to build a

252


relationship that will be beneficial to both the customer and the company. In many cases,

customers request certain employees and will only conduct business with the employees

that they have known for a long time and have built a mutual trust in. Customers like this

tend to be loyal, long-term, and profitable customers for the organization.

One area that Maine Savings must always be cautious about in regard to the employee-

customer relationship is in the realm of e-services. The institution’s e-services provide

convenient and automated financial services to its customers. However, in doing this,

many former personal relationships have been replaced by more informal electronic

processes that some customers may find impersonal and may even distrust. This has

proven to be the case with many of the institutions older customers. At times, for the

greater good of its customer base, certain applications must be automated in order to

provide more cost effective and expedient services. When this happens, there are several

customers that complain that they are being denied the opportunity to speak to a “real”

employee and to interact with the employee of their choice. Maine Savings management

has been sensitive to this feedback and has been able to ensure that these customers have

access to the employees of the organization and are not forced into using electronic

services against their will.

A very good example of how effective employee-customer relationships can prove to be

beneficial for Maine Savings can be found in their Retail Operations division. This

department is responsible for the pricing and management of the institutions CD

portfolio, which accounts for a full 30% of the organization’s deposit base. Because of

253


this, it is a very important area that requires constant contact with the customers that have

placed these CD’s for investment in the institution. Although the deposits in this portfolio

account for greater than 30% of the deposit base, the portfolio only accounts for less than

5% of the organization’s customer base. Therefore, if only a few customers are

unsatisfied or elect to take their deposits elsewhere, the portfolio could suffer a sizeable

decrease in assets in a short amount of time. However, the Operations Specialist

managing this area, Evelyn Smith, has built relationships with most of the holders of

these deposits, and has been able to translate this into their trust of her, and consequently

Maine Savings. Because of this trust and the relationship that exists, Evelyn is able to

keep more than 98% of the deposits that mature. She is able to accomplish this even

when Maine Savings may not be able to offer the best rate and terms available in the

open market. Many customers have offered feedback indicating that they are more than

willing to keep their money at Maine Savings no matter what the terms and conditions

are, as long as they are able to deal with Evelyn.

The development of personal relationships is especially important in an industry with a

very high rate of competition, as is the case with Maine Savings. Relationship building

between employees and customers gives the institution the ability to have access to new

or return business without having to compete aggressively with the local competition.

Management at the organization constantly addresses the issue of building relationships

with customers and the value and benefit derived from such relationships. The

management at Maine Savings understands that the basis for a productive and trusting

employee-customer relationship is a satisfied and loyal employee. If employees do not

254


believe in the products or services that they are selling and representing, they will not be

willing to engage customers in the sale of those same products and services. For this

reason, Maine Savings management strives to involve all employees in the introduction

of new products and services and garner their feedback whenever possible. If employees

have buy-in to the process and believe in the products and services, this attitude will be

evident to the customers they serve.

Maine Savings recent implementation of a courtesy pay program serves as a good

example of employee involvement in the product development initiatives at the

organization. Before just mandating the implementation of this product, management

surveyed a large cross-section of employees to get their views of the proposed program

and to solicit employee feedback and attitude toward the product. Surprisingly, the

feedback on the product was predominantly negative and the comments revealed a

complete misunderstanding of the product itself, as well as any benefit to the customer. In

this case, had management gone ahead with the product implementation, it is evident that

the employees would not have promoted the product to customers and the product would

have failed. Employees represent the company and customers trust employees and quite

often, act upon employee input or suggestion. In order to build strong employee-customer

relationships it is vital to instill a trust in the employee, as well as the customer for the

purposes of a mutually beneficial relationship for the customer and the company.

255


The Fish Philosophy at Maine Savings

The “FISH” philosophy of delivering world-class customer service was previously

discussed comprehensively in this paper. In 2005, Maine Savings made the decision to

adopt the “FISH” philosophy of delivering customer service. Initial training sessions

were held with all of the company’s employees that included an introduction to the

“FISH” philosophy, a video about Pike Fish Market, and the receipt of a book about the

philosophy and how to adopt it. In addition to the training, management made the

decision to make certain changes within the organization that were synonymous with the

philosophy. First, the organization adopted a business dress policy to allow for a more

relaxed atmosphere. Second, management asked that an employee party committee be

established for the purpose of creating fun events for the employees. Third, employees

were given the opportunity to choose their own music, rather than having to continue to

listen to the piped in “elevator” music that had been the standard. And lastly, employees

were given the latitude to come up with a catch phrase to signify the delivery of great

customer service. By instituting these steps, management showed their commitment to

the “FISH” philosophy and proved to the employees their resolve in taking actions that

would prove the theories successful.

Rather than try to recreate the proverbial wheel, Maine Savings Senior Staff decided that

the ‘FISH” philosophy was a proven way to improve customer service and decided to

implement it at the organization. As was previously discussed, the philosophy is centered

on four guiding principles that Maine Savings was able to customize for their own use.

Although some of these elements are very similar to those discussed in the previous

256


customer service delivery section of this paper, they have their foundation and are

integral parts of the “FISH” customer service strategy.

Play – Maine Savings has worked very hard to stress to its employees that their work can

be fun. As the “FISH” philosophy states, “work made fun gets done, especially when we

choose to do serious tasks in a lighthearted, spontaneous way. Play is not just an activity;

it’s a state of mind that brings new energy to the tasks at hand and sparks creative

solutions.” Management has taken many different steps to promote work as fun that

include giving employees the latitude to design their own work areas, allowing

employees the opportunity to change certain processes, and empowering employees to

come up with different ways to make their work more fun.

Make Their Day – This element is closely related to information discussed in the

employee-customer relationship section of this paper. Make their day is similar to the

point that the organization’s management makes when they instruct their employees to

look at every customer interaction as a unique event. When the organization’s employees

“make someone’s day” (or moment) through a small kindness or unforgettable

engagement, they turn even routine encounters into special memories.

Be There – This element is the key to customer service delivery at Maine Savings.

Again, this element is akin to making every customer interaction a unique and memorable

event. When the organization’s employees are present for the customers, they feel as

though they are unique and special, which in turn is translated into satisfaction and

257


loyalty. Being there also is a great way to practice wholeheartedness and fight burnout,

for it is those halfhearted tasks employees perform while juggling other things that wear

them out.

Choose Your Attitude – Attitude was also discussed previously, but in terms of the

necessity to have a good attitude when dealing with customers. The difference between

the necessity of a good attitude and the “FISH” philosophy is that the “FISH” philosophy

teaches that employees can choose their attitude. This concept is talked about constantly

with Maine Savings employees. Managers remind employees that they have the power to

choose their attitude when at work. The ‘FISH” philosophy teaches, “that when you look

for the worst you will find it everywhere. When you learn you have the power to choose

your response to what life brings, you can look for the best and find opportunities you

never imagined possible. If you find yourself with an attitude that is not what you want it

to be, you can choose a new one” (Fine 2000).

Maine Savings has been able to effectively implement the “FISH” philosophy with very

positive results. Employees are motivated by the freedom to make their jobs fun,

customers enjoy having the employees be there for just them, and management enjoys

having a motivated, satisfied workforce that enjoys being at work. As was the case at

Pike Place Fish market, by instituting and living these four principles, the employees at

Maine Savings have been able to deliver an unmatched customer service experience that

has become recognized and emulated in the financial services industry throughout Maine.

The organization’s customers have taken notice of the “FISH” initiatives at the company,

258


and the competition has begun similar initiatives in order to bolster their own customer

service delivery in an attempt to keep up with Maine Savings.

Transforming Customer Satisfaction Into Customer Loyalty at Maine Savings

Maine Savings is fortunate enough to be able to at least approximate the value of a loyal

customer, and can therefore prove that loyal customers are their most profitable. The

Maine Savings management understands fully that just because customers claim to be

satisfied customers, they are not necessarily loyal customers. In many instances, the

organization learns of customers that are satisfied with their most recent transaction, but

that would defect to a competitor if even a slightly better deal came along. Although the

research indicates that there is an element of emotion involved in gauging whether or not

a customer is loyal, Maine Savings chooses to measure customer loyalty based on

longevity, volume of business, repeat business, and whether or not the customer

considers Maine Savings their PFI (Primary Financial Institution). Loyal customers

translate into the most profitable customers for several different reasons that include the

need for little or no marketing/advertising, the ability to offer market pricing without the

need for deep discounts, and the ability to retain customer deposits over a long period of

time. The organization is able to use mathematical calculations to arrive at a profitability

measure for every loyal customer.

Although Maine Savings strives everyday to create satisfactory experiences for their

customers, the real goal is to create a loyal, long-term customer. Satisfied customers tell

the organization that they are satisfied, but loyal customers tell everyone that they are

259


satisfied and tell them why. A loyal customer is the best advertising that an organization

can have. Loyal customers at Maine Savings indicate that they do have an emotional

connection to the institution and that they feel as though they have a stake in the success

of the organization. Management is aware of the trap of believing that customer

satisfaction surveys are an indicator of customer loyalty, as they are not. Management

relies on time data more than anything else in order to determine the number of loyal

customers and their financial impact on the organization. Loyal customers come as a

result of a culmination of positive experiences over time, not just one interaction with the

organization. Loyal customers view the relationship with the organization as just more

than a financial one.

As is the case with many financial services companies, Maine Savings has become very

proficient at collecting, monitoring, and translating customer satisfaction related data.

However, management is careful not to use this data to infer any kind of customer loyalty

quotient. Because Maine Savings does use time related data in conjunction with product

data to effectively identify loyal customers, the company is able to create products

tailored for their “loyal” customer base. The organization has several bundled products

that have been created for truly loyal customers that allow these customers the

opportunity to take advantage of certain discounts and earnings credits. The organization

feels strongly that loyal customers should be rewarded for their loyalty and takes the

steps necessary to accomplish this. Maine Savings has been able to ascertain that their

customer loyalty programs have instilled a further sense of loyalty in this particular

customer base, and has further served to solidify these relationships.

260


Measuring Customer Satisfaction at Maine Savings

As previously discussed a number of times, the end goal of customer satisfaction should

be the creation of customer loyalty in order to have the maximum possible positive effect

on the service-profit chain of an organization. However, loyal customers are not

necessarily loyal customers from their first transaction; it usually takes many positive

experiences for customers to become loyal. It is for this reason that it is necessary to track

and monitor customer satisfaction so that an organization can ensure that it is doing what

is necessary to create loyal customers. As this paper previously touched on, Maine

Savings has begun the transformation into a customer-centric organization. They

understand that being a truly customer-centric organization means putting the satisfaction

of the customer at the center of every decision. Many loyal customers in organizations

are there because someone in the organization went the extra mile for them or performed

above and beyond normal expectations. At Maine Savings, employees are urged and

coached to go the extra mile for every customer in an effort to turn every customer into a

loyal customer. The remainder of this section will examine several of the techniques that

Maine Savings uses to ascertain the level of satisfaction of their customers. In addition,

examples will be cited that will highlight the effect of the organizations efforts in

measuring customer satisfaction.

The most commonly used method of gauging customer satisfaction in most organizations

is through the use of the traditional customer satisfaction survey. In this regard Maine

Savings is no different. However, because of the importance of asking the right questions

261


and allowing appropriate space and time for the customer’s response, the proper design

and administration of a survey tool is vital. It is for this reason that Maine Savings has

chosen to enlist the services of an outside, professional survey company that designs and

conducts the surveys on behalf of the organization. The Senior Staff works very closely

with the survey company to design the proper questions that will elicit valuable and

actionable feedback from the customer base. After the surveys have been conducted, the

outside survey firm compiles the information and reports it to Maine Savings

management in pre-arranged formats. Management then analyzes each category to ensure

a complete understanding of the customers’ response. Items are then given to the

appropriate department manager for action and response. The final phase of the customer

survey process is to fully analyze the feedback and the steps that were taken to address

the issues. The most important consideration in designing a customer satisfaction survey

for the Senior Staff is to ensure that every item is actionable in some way as to act to

improve the customer service delivery for the organization.

Another form of customer service satisfaction measures that is discussed in the applicable

research on the subject is the use of profitability calculations to try to determine the level

of satisfaction for a particular customer. This method is very difficult to accurately apply

and is wrought with potential errors and misleading indicators. Maine Savings has

recently begun using customer profitability data to identify customer loyalty, but has

ruled out the method as being accurate enough to effectively measure and gauge

customer satisfaction. A major flaw in this method when trying to determine the

satisfaction of customers is the lack of input or feedback from the customers themselves.

262


In essence, this method is a very myopic and unilateral method of gauging customer

satisfaction, as no consideration is given to the opinions of the organization’s customers.

A tangent product that is being introduced by the company is a product-tracking program

which allows an employee to see what products the customer has with the institution

instantaneously. This allows the employee to not only offer the customer products or

services they may not have, but also gives them an opportunity to personally assess the

customer’s level of satisfaction with the products and services that they do have. This

opportunity for personal and instant feedback has proven to be invaluable to the

organization.

On large products such as mortgages, Maine Savings sends a personal comment card to

the customer, and later makes a personal phone call to ask the customer about their

experience. Statistics show that customers have a high preference for keeping all of their

accounts at the institution that carries their mortgage if it is possible. Because the affinity

relationship is so strong where mortgages are concerned, the company goes to great

lengths to ensure the customer has a very satisfactory experience when obtaining a

mortgage. During the follow-up phone call, the Mortgage Officer thanks the customer for

their business, but also asks them several questions in regard to their experience, in

addition to soliciting feedback on how the process could be made better for them. Based

on these follow-up phone calls, several changes to the mortgage application process have

been made over the past several years. The key to this process has been to ensure that the

questions asked are actionable in some form so that change is possible based on the

feedback of the customer. In the case of negative responses, management ensures that a

263


direct response to the customer in regard to the issue is made after the issue has been

resolved. This response comes from a member of management, addresses the issue, and

explains the resolution in detail to the customer. Customers of Maine Savings have

indicated that this candor and transparency has led to increased customer satisfaction and

loyalty.

Knowledge Management Strategies at Maine Savings

Although knowledge management at Maine Savings is just in its infancy, the initiative is

already beginning to produce benefits. Knowledge management at Maine Savings

actually began as an offshoot of attempting to streamline the training process within the

company. The concept of knowledge sharing was introduced to the IT department, as a

result of the need for IT infrastructure support. Shortly thereafter, a PAT (Process Action

Team) team was convened with cross section representation from the organization. This

led to the establishment of strategies for implementation, as well as the establishment of a

working budget for expected costs. Now that networked terminals and personal

computers are a fixture on every front-office desktop, computers are mainly being used

directly by knowledge workers themselves. Due to the massive proliferation of computer

technology, the company’s IT infrastructure is the ideal place to adopt knowledge

management principles (Haley 2005). Maine Savings realized this early on and made the

strategic decision to treat the implementation of a knowledge management system as an

IT strategic initiative.

264


The KM PAT team at Maine Savings developed a strategy for the implementation of a

robust and efficient KM system. This strategy was incorporated into the organization’s

overall strategic business plan. The strategic plan included: a cultural/environmental

analysis, an implementation plan, an allowance for deviation, an evaluation strategy, and

a continuity strategy. Upon completion of the development of these strategies, they were

presented to the Board of Directors by the Senior Management team. Once the Board and

Senior Staff had completely bought into the initiative and pledged complete support, a

kick-off meeting with all company employees was held. Each and every employee in the

organization was given a hardcopy of the strategy, as well as an anonymous feedback

form that they could use to provide feedback on the process implementation. At Maine

Savings, weekly meeting are held to review the overall strategies, as well as the progress

of each individual initiative. The Board is subsequently informed of the progress and

content of these meetings on a monthly basis. Because the KM strategy has been rolled

into the general strategic business plan for the company, the Executive’s compensation is

directly tied to the implementation and effectiveness of the knowledge management

system at Maine Savings.

Knowledge Management Instruments at Maine Savings

Harnessing and homogenizing knowledge management instruments at Maine Savings

proved to be a monumental task, and is still a work in process after more than eighteen

months. The first priority was to convert the many different existing instruments (binders,

tacit knowledge, notes, etc.) into one KM shared database. The instruments used were:

interviews, brainstorming sessions, repertory gridding, concept mapping, and functional

265


area process flow analysis (Haghirian 2006). After identifying the instruments to be used,

the most difficult part of the process was to define the instrument and the expected

output. This process involved educating everyone involved so that they had a full

understanding of the importance of the process, as well as an understanding of how to

maximize the KM instrument to realize its maximum effectiveness. During this initial

phase, two other important tasks were accomplished: mapping the sources of internal

expertise, and the creation of networks of knowledge workers.

The two most effective knowledge capture instruments that led to robust entries into the

KM database were the interviews and brainstorming sessions. Topic and departmental

questionnaires were created in order to uniformly collect data from the interview process.

Because the design of the questionnaire was accomplished in accordance with the KM

system format, the transfer of information was efficient and comprehensive. The

brainstorming sessions allowed the participants to collaborate on their knowledge and

experiences, which in turn, resulted in comprehensive knowledge transfers to the KM

database. Another important point is that the knowledge capture instruments were

initially done based on specific department or expertise. This has allowed for a “cleaner”

foundation of information and knowledge that can be built upon by people further from

the core process.

Knowledge Management Barriers Identified at Maine Savings

The knowledge management barriers identified at Maine Savings are very similar to other

organizations that have undertaken the task of instituting a comprehensive knowledge

266


management system (Appendix 6). In a survey conducted of companies involved in

knowledge management initiatives, 56% identified the biggest impediment to knowledge

transfers in their organizations to be culture. “While “people issues” may be endemic to

any change initiative, knowledge management activities seem to bring them out in

abundance” (Ruggles 1998). In the beginning, the employees of Maine Savings seemed

to buy into the KM concept and were supportive. However, after the first round of

knowledge transfer activities, the visible resistance to change set in. people in the

organization began to make excuses that consisted of: I don’t have time, others don’t

understand, why do others need to know, and so on. Even today, it is a difficult task to

keep members of the organization motivated and committed to the knowledge

management process. Although Maine Savings believed that a culture open to KM had

been created, it has proved to be fleeting and lacks any lasting support from those

involved. Because of this, a barrier exists to further expanding the KM system in an

efficient manner.

Another major barrier to the implementation of a viable KM system at Maine Savings is

the ongoing commitment to the initiative by those involved in the process. A key

challenge for managers in the forthcoming turbulent environment will be cultivating

commitment of knowledge workers to the organizational vision. As the progress of the

initiative moves forward it will be more difficult to define long-term goals and objectives.

This will require real-time planning and communication strategies to assure that

organizational goals and strategies are being adhered to (Malhotra 2004). Each day at

Maine Savings it is a struggle to keep the KM initiative a priority in the face of the

267


regular daily work that needs to be done. As a result, commitment is beginning to visibly

wane, and consequently, the progress of the initiative is beginning to stall. The once

dynamic strategy is quickly becoming a static vision of old, and is looked upon by

knowledge workers in that fashion.

The last barrier to be discussed in this section is by far, not the least important. Corporate

economic factors are beginning to prove to be barriers in the progress and corporate-wide

proliferation of the system. The initial budget established for the implementation of a KM

system at Maine Savings has been exceeded by more than 500%, with no end to

necessary spending in sight. Already, there is speculation about having to trim expenses

associated with the endeavor, or cutting corners to make the initiative more financially

viable. As margins shrink and yields trend downward, the financial pressures associated

with the knowledge management system will begin to magnify themselves. This

economic pressure does not even factor in the cost of human capital necessary to

effectively establish the system.

In Managing in a Time of Great Change, Peter Drucker writes that “knowledge has

become the key economic resource and the dominant – and perhaps even the only –

source of comparative advantage” (Ruggles 1998). Many global companies such as

Toyota, Siemens, McKinsey & Co., and so on, have realized this and turned to

knowledge management systems in order to harness this resource known as knowledge.

In order to effectively capture this knowledge and use it for competitive advantage, one

must understand the difference between data, information and knowledge. As this paper

268


previously discussed, data can be broadly defined as a collection of facts, facts about

specific events and about an industry in general. These facts can originate from a variety

of sources and includes such items as raw statistics, demographics and marketing

information, and so forth. Data is the basis for creating knowledge (Haley 2005).

Companies that have successfully employed a knowledge management system have

realized the value of knowledge and have even begun to look upon this knowledge as a

tangible asset, much like any other on their balance sheet. Maine Savings is no different

in this regard. The Company recognized the value and benefit associated with a

comprehensive KM system and set out to create one.

As the information has suggested, the implementation of a viable knowledge

management system is not something that is accomplished overnight. Rather, it is a

process that involves much planning and foresight, as well as high-level support and a

steadfast financial commitment. In order for the KM process to be successful, it must be

engrained in the strategic plan of the organization and be monitored like any other

corporate strategic initiative. Extensive planning and coordination must accompany the

organizational commitment, and must be based on the long-term and consider any

modifications that may need to be made along the way. In other words, the road to a

comprehensive, valuable KM system can be viewed as an arduous journey that requires

commitment, dedication, constant attention, and resources.

269


Customer Relationship Management at Maine Savings

CRM (Customer Relationship Management) is a relatively new concept to Maine

Savings, primarily due to the fact that the organization’s long time data processing

system was not capable of handling such information, or integrating the appropriate

software necessary to track the desired information. The organization went through a

very comprehensive data processing conversion in January 2006 that resulted in a new,

robust software system capable of integrating the most sophisticated CRM software

available. As part of this package, the organization is now able to implement CRM

capabilities that include instant decisioning, customer product tracking, customer

preference tracking, automated customer offerings, and is able to provide the company

with a picture of the customer’s entire relationship with the organization. Not only has

Maine Savings been able to use this new technology to better provide products and

services to its customers, but also to automate more customer information and manage

data processing costs more efficiently.

The best and most noticeable result of the embryonic CRM system at Maine Savings is

the ability for the organization to now treat each customer uniquely and distinctly based

on their relationship with the institution. In the past, everyone with a credit score of 650

would be offered the same rate on an auto loan, despite any other relationships they

maintained at the company. Now, however, the customer’s rate is based on the whole

relationship that they maintain with Maine Savings. For example, if a customer has a

Visa card, mortgage, and a checking account with the company, they will receive a better

auto loan rate than will a customer with just a savings account (all other credit

270


considerations being equal). This capability has led to the ability to reward customers that

do larger volumes of business with the company, but also acts as an incentive for

customers who do not to do more business with Maine Savings. The CRM system also

allows customers to be offered products that they need but are unaware of. For example,

a customer may have an auto loan, but not have GAP or disability insurance. The CRM

system will recognize this and automatically send a message to the customer offering

them this product. In this manner, the program has served to increase sales of certain

products and also increased customer satisfaction levels by ensuring that customers

receive information on products that may be of benefit to them.

In the past, Maine Savings was forced to do very expensive blanket advertising and

marketing covering their entire customer base in order to offer a product or service to

customers that may want or need them. This shotgun approach proved to be both costly

and ineffective. One of the biggest benefits of the organization’s new CRM system is the

ability of the organization to target offerings directly to customers who would benefit

from them. This in turn aids in building a unique relationship with the company. For

example, in 2004 (before the implementation of the company’s CRM system) a decision

was made to promote the institutions student loan program. Subsequently, advertising

was purchased and space was used in the company’s quarterly newsletter to promote the

product. As a result, there were approximately 150 responses to the advertising out of a

customer base of more than 25,000. With the new CRM system, the company is able to

target those customers that would benefit from student loan products and market directly

to them. This in turn saves both time and money, but more importantly from the

271


customer’s point of view, does away with unnecessary marketing and potential

information overload. The organization has received volumes of positive feedback from

many customers in regard to their satisfaction with the lowered amounts of marketing and

advertising materials they are receiving. Customers are now beginning to understand that

the materials they do receive from Maine Savings are relative to them and may be

important information they should act upon.

Chapter 9

A Summary of the Service-Profit Chain Initiative at Maine Savings

Because Maine Savings carefully picked and hired senior managers that have had

experience with the different elements involved in the service profit chain, they have

been able to realize a steady growth in corporate profitability as a result. These members

of executive management have extensive expertise in human resource management,

customer service, finance, and operations management. When these skill sets were

assembled and coordinated into working toward the goal of leveraging improved

employee satisfaction and added customer retention/loyalty, the organization was able to

realize a growth in corporate profitability. This section will examine several of the

strategies that Maine Savings employed in order to increase profitability by improving

employee satisfaction and customer retention. Although each of these elements has been

comprehensively examined previously, this section will concentrate on the aggregate

implementation strategies used and the direct financial benefits derived by the

organization. A summary of the employee and customer elements involved in Maine

Savings results will be considered and reviewed in the following section as well.

272


The executive management team at Maine Savings challenges itself to constantly search

for new innovative ways in which to increase the profitability of the organization. As any

businessperson is aware, there are as many strategies in existence to accomplish this, as

there are books on the subject. Rather than succumb to the “flavor of the day” in

business, John Reed, Maine Saving’s CEO, decided to focus on the basics of the

business. This led the management team to analyze the most important elements of the

business, which they determined to be: employees, customers, and profits. This naturally

led to the adoption of a strategic plan that included all of the analytical elements of

Heskett, Sasser, and Schlesinger’s Service Profit Chain. These authors identified a

strategy in which successful companies can link profit and growth to loyalty, satisfaction,

and value. Maine Savings management team identified exactly these areas and began the

process of creating a working strategy by which to address the important elements

involved in this analysis. From 2004 through 2006, the organization implemented this

strategy in a methodical and purposeful manner, taking the time to evaluate every step

involved in the process. The following section will address many of the positive

outcomes that came as a result of implementing this strategy.

The Resultant Benefits of Increased Employee Satisfaction at Maine Savings

Many organizations that seek to improve an area of their company such as employee

satisfaction take an outside-in approach to the issue. Maine Savings made a conscious

decision to do the opposite and take an inside-out approach that would lead to a more

comprehensive analysis and understanding of the subject. Rob Carmichael, the Vice

273


President of Human Resources & Training was tasked with planning and implementing

the phases of the strategy that were concerned with employee satisfaction. Rob’s plan

was very comprehensive and included every identifiable aspect that could be associated

with employee satisfaction and the workplace. One aspect of the plan that proved to be

insightful and helpful in prioritizing initiatives resulting from the plan’s implementation

was the assignment of a dollar value contribution to profitability as a result of any

change. No area or effect to employee satisfaction was left out of the plan and no topic

was off limits, including management’s reaction to or support of employee satisfaction

initiatives. Everyone involved in the process understood that in order for the process to be

effective it must be conducted in an open and honest manner.

Probably the most noticeable result in terms of both increased productivity, as well as

return on investment, came as a result of the organization implementing a PTO (Paid

Time Off) program for its employees. While under the previous traditional sick and

vacation type plan, Maine Savings’ employees used more than 97% of all earned sick

time, most of which was unscheduled and used on a sporadic basis. During just the first

year under the PTO plan, Maine Savings’ employees only used 8% of the PTO time for

unplanned and unscheduled sick call-outs. These percentages indicate that the

organization benefited from a much lower occurrence of unplanned absences and

increased productivity as a result of the employees increased attendance. In addition, the

organization benefited financially by not having to use replacement workers and upset the

balance of productivity as a result of having to cover an unplanned absence at the last

minute. Subsequent employee surveys indicate a much greater rate of employee

274


satisfaction with the new PTO program because of the flexibility to use time when

needed by the employee. In this case, both employees and the organization were able to

benefit from the change.

Another glaring example of a mutual benefit to both the organization and employees that

came as a result of implementing the service profit chain strategy at Maine Savings

concerns the implementation of a formal training program. As this paper discussed

previously, before the arrival of Rob Carmichael as the Vice President of Human

Resources/Training in 2004, the organization had no formal employee-training program.

This led to inadequately trained employees, lower productivity, operation inefficiencies,

and low employee morale. Before the formal training program, employees were hired

then, placed for on-the-job training in the area of the company that they were assigned to.

After the implementation of the formal training program, employees are hired, spend one

week in formal training acclimating the employees to the Maine Savings culture then, are

enrolled in a formalized training program designed for their specific position. After the

successful completion of the formal training program, the new employee is assigned to a

job mentor for an unspecified period of time. This training process has served to

drastically improve employee longevity, productivity, accuracy, and overall operational

efficiency. The financial benefits of this element are too many to quantify, but since the

initial implementation of the program, return on assets has increased on average 30%

year-over-year (Maine Savings 2004, 2005, 2006).

275


Employee surveys that were administered during the period of 2004 through 2006

indicate an increasing level of overall employee satisfaction, as well as satisfaction with

the many elements associated with the service profit chain initiative. By striving to

enhance the service profit chain at Maine Savings, the management was able to create a

signature experience for its employees and set itself apart from the competition, while at

the same time gaining a competitive advantage. “A signature experience is a visible,

distinctive element of an organization’s overall employee experience. In and of itself, it

creates value for the firm, but also serves as a powerful and constant symbol of the

organization’s culture and values” (Erickson and Gratton 2007). After analyzing and

implementing all of the steps involved in the organization’s plan to improve employee

satisfaction, the senior management team met to discuss the results during a weekend

management retreat meeting. At this meeting, every aspect of the plan were analyzed and

compared to ensure a resultant positive effect on the employees of the organization, but

also on the profitability of Maine Savings. In the end, management was satisfied that the

initiatives involved with improving employee satisfaction were successful and led to the

enhancement of corporate profitability.

The Resultant Benefits of Increased Customer Satisfaction at Maine Savings

Maine Savings has always considered itself a “customer focused” organization, but had

never systematically evaluated the elements that lead to customer retention and loyalty.

This task was assigned to Mike Cust, the organization’s Vice President of Retail

Operations and Anthony Emerson, the Vice President of Finance/Accounting/Operations.

Mike’s primary responsibility was to assess the level of customer service and support at

276


every possible customer contact point. Anthony’s primary responsibility was to assess the

financial impact of the different customer tiers in order to try to accurately assess ROI

levels based on customer loyalty. Just as Rob did with his analysis of the organization’s

employee satisfaction, Mike and Anthony developed a comprehensive and detailed plan

that included and analysis and examination of every process involved in delivering

products and services to the customers of Maine Savings. The important aspects involved

in this analysis included assessing customer satisfaction, retention rates, and attributing

an ROI to loyal customers.

One of the first areas to be examined was related to the applications that customers filled

out to apply for the institutions products. A good example of the analysis and results of

an application process concerned the organization’s Visa application. The company had

been using the same Visa application for more than ten years and was provided by a

third-party vendor. The application contained requests for more than thirty different

pieces of information related to the customer, and took approximately thirty minutes, on

average, to complete. Once the customer completed the application, it was forwarded to

Loan Processing for approval. This process took on average, about six business days. An

important aspect of the application process was that in order to even apply for a Maine

Savings Visa, the customer must have already had a current account number and be a

customer in good standing. After a rigorous analysis of the process and an assessment of

the essential information needed to process the request, a recommendation was made to

modify the Visa application. The end result was an application requesting only three

pieces of information; the customers name, account number, and income, and an average

277


time to complete of less than two minutes. These results were applied to many of the

organization’s other applications as well.

The research concerning customer loyalty has shown that loyal customers have an

emotional connection to an organization that goes beyond just being satisfied. Maine

Savings management made a concerted effort to identify processes associated with

customer loyalty that could be enhanced in order to help create an emotional connection.

One item in particular that was identified through the organization’s service shopping

program was the use of the customer’s name. Using the customer’s name is one of the

easiest ways to create an emotional and personal connection that can take the experience

beyond a simple transaction. In 2004 when the program began, only 50% of the

organization’s employees were using the customers name during a transaction.

Management set a goal of 98% for customer name use. The service-shopping program for

December 2006 revealed that customer name use had exceeded 90% for the latest shop.

Although the financial results of this endeavor are very difficult to quantify, the fact that

it leads to a greater emotional connection by customers is definitely a positive result for

Maine Savings.

In an attempt to quantify the number of truly loyal customers of Maine Savings, Anthony

Emerson created a spreadsheet in order to assess the ROI of this customer base. Before

this could be done however, a stratification of the more than 25,000 customers, coupled

with certain criteria, had to be assembled in order to adequately define a “loyal”

customer. Retention rates were calculated based on length of relationship, number of

278


products, and total dollar value of the relationship. The spreadsheet was set up to

calculate the profitability of a customer in two, four, eight, twelve, and fifteen-year

increments. As previous research has indicated, the longer the relationship, the more

profitable the customer is for Maine Savings. Now that Maine Savings management has

an accurate picture of the true value of their customer base, they are in a position to

calculate what it would be worth to increase their customer retention rate, which is the

only realistic way of evaluating investments in customer acquisition and customer loyalty

(Reichheld 1996). In addition to the benefit of being able to accurately identify the

organization’s loyal customer base, the organization can know use this information for

other important purposes such as target marketing.

In an attempt to assess the importance of the employee – customer relationship, Maine

Savings management undertook the very extensive and involved task of reviewing the

product records for the almost 5,000 customers that were previously identified as “loyal”

customers. The objective was to evaluate the different employees that interacted with the

customers during the application process to assess whether or not employee consistency

at Maine Savings was a contributing factor in making these customers loyal. The results

were staggering to say the least. In just greater than 85% of the time, the same employee

interacted and processed the product applications for these 5,000 customers. This lends a

great amount of weight to the hypothesis that loyal customers become loyal because of

their satisfaction with an employee at the organization. One can easily infer that an

emotional connection has been established between the employee of Maine Savings and

these loyal customers. This employee – customer relationship can therefore be considered

279


a major factor in the continued growth of corporate profitability as a result of continued

profitability from loyal customers.

Many times organizations assume that customers will become satisfied if prices and costs

are simply lowered. However, much research has indicated that customers are willing to

pay more for service and convenience. Convenience costs something and it has a value to

many customers. “Marketing theorists for years have defined convenience in terms of

such things as “place, time, and form utility.” The value of convenience will vary among

customers, requiring that a service provider remain sensitive to the needs of various

customers” (Heskett, Sasser and Schlessinger 1997). Recognizing this, Maine Savings

management conducted a series of customer surveys, both general and targeted. There

was an overwhelming response from customers that the institution needed to have more

branches in the greater Bangor, Maine area in order to facilitate customer convenience.

Based on this feedback, the organization built two new branches in Bangor. Since the

branches have been constructed, management has received an inordinate amount of

positive feedback and has also realized a surge in new customers.

Although Maine Savings began the process of instituting a comprehensive CRM

(customer relationship management) system in early 2006, the organization had not yet

conducted a profitability analysis until this point. In an effort to ascertain the profitability

of the implementation of the CRM system, management directed that certain reports be

generated in order to gain an understanding of the impact and profitability of the

program. At the inception of the CRM implementation that began in January 2006,

280


different target marketing strategies were created that were to be directed at certain

customer segments. The reports that were generated to gauge the effectiveness of the

CRM system and target marketing initiatives were able to show the penetration rate and

resultant profitability as a result of increased sales. The reports indicate that the target

marketing initiative that is part of the CRM system is very effective. The new product

penetration rate exceeded 30% and profitability per customer increased more than 12%.

Because of these results, the organization has created a CRM Process Action Team to

assess new initiatives and monitor the results for maximum efficiency.

Although it is difficult to derive a specific financial contribution to profitability based on

the employee/customer satisfaction measure, it is clear from Maine Savings’ experience

that as employee satisfaction increased, so too did customer satisfaction. Among the first

to document the “satisfaction mirror” were Benjamin Schneider and David Bowen. In a

study reported in 1985, they established close links between customer and employee

satisfaction levels in the branches of a banking organization. In a replication of the study

eight years later, they concluded, “the degree to which employees believe their work is

facilitated [an expression of satisfaction] yields the most consistent information about

customer satisfaction” (Heskett, Sasser and Schlesinger 1997). During the process

improvement initiatives, Maine Savings tracked both employee and customer satisfaction

measures on a constant basis. Both satisfaction measures tracked upward and parallel

with each other. Therefore, management at the organization can rationally conclude that

increased employee satisfaction has a valuable and measurable effect on increased

customer satisfaction levels at the organization.

281


Resultant Effects on Corporate Profitability at Maine Savings

During this process, Maine Savings undertook many different initiatives aimed at

improving employee satisfaction, customer satisfaction, and the organization’s

profitability. Many of these initiatives were being executed simultaneously and required

different timetables and strategies in order to execute. Although each element involved in

the initiative was important to the overall process, a dollar amount or precise effect on

added profitability could not be determined. However, Maine Savings realized a year-

over-year improvement in ROA of 30% for the periods from 2004 to 2006 (Maine

Savings 2004, 2005, 2006). In addition to the aggregate positive results, sales per

customer increased by more than 10% during the same period of time. Return on equity,

cash flows, and net income all improved markedly during this period of time as well.

Maine Savings executive management team has reviewed the process and results

completely, and feel collectively that the improvements in employee satisfaction and

customer satisfaction are directly responsible for the improvements in corporate

profitability.

Chapter 10

ACADEMIC LITERATURE REVIEW

Overview

The following sources were consulted for the purpose of locating and identifying related

publications, books, and media sources in preparation for writing this paper: Proquest, the

Internet, The Harvard Review, The Economist, Marvel, and the URSUS Network. There

were many academic papers relating to employee satisfaction, customer satisfaction, and

282


strategies for increasing corporate profitability that were used as references. There were

also special searches for information on these and related topics conducted using

proprietary searches at the Libraries of Harvard University, Northeastern University,

Boston University, and the University of Maine. Searches were conducted for papers

related to the topics of leadership, management, work environment, employee training

programs, employee development, employee recognition, organizational goals,

communicating with employees, employees and teamwork, employee empowerment,

social interaction in the workplace, organizational culture, employee benefits, employee

motivation, customer-centric organizations, customer acquisition, branding, target

marketing, delivering world-class service, customer expectations, training for customer

service, the employee-customer relationship, measuring customer satisfaction, knowledge

management systems, customer relationship management, customer loyalty, and service

profit chain analysis.

Although there were an ample amount of papers related to the individual elements that

make up the triad known as the “service profit chain”, there was only a small amount of

direct research available on the relationship between employee satisfaction, customer

service and corporate profitability. Some of the related papers found during the research

process were reviewed, incorporated into the paper, and summarized in the following

sections: employee satisfaction, customer service, customer loyalty, and corporate

profitability.

283



The research associated with the many different aspects involved in employee

satisfaction is plentiful. Focusing on employees, the study sought to understand the

organizational drivers of employee satisfaction and employee engagement (the degree of

employee motivation and sense of inspiration, personal involvement, and

supportiveness), and the downstream effects of these employee attitudes on customers

and financial performance (Klein et al. 1995). The foundation of good human relations –

the interaction between employers and employees and their attitudes toward one another

– is a satisfied work force. Job satisfaction is the degree of enjoyment that people derive

from performing their jobs (Chapter 11 2006). Many studies, including an in-depth study

by the Unites States Army conclude that organizations that focus on the human resource

aspect of their business will create a high performance work place that will result in

satisfied employees, satisfied customers, and allow the organization to capably adapt to

change.

Many articles, publications, and studies attempt to define the many elements associated

with employee satisfaction in the workplace (Adams 2006, Agnvall 2006, Butcher 2006,

Cascio 1998, Gray 2006, Levine 1995, Melamed 1996, Parham 2003, Pounds 2006,

Roche 2006, Smith 2006). One of the indicators that show achievement toward improved

employee satisfaction is success of the company and personal growth and development of

employees. “Employees who feel as though they have ownership or power in their job,

not only prove to be a beneficial employee for their direct supervisor, but also to the

entire company” (Hayes 2003). A study conducted at the University of Piraeus

284


acknowledges and discusses the dramatic changes that have taken place in organizations

around the world in the past decade. Traditional hierarchies and functional structures are

being reduced. Although re-engineering and downsizing initiatives are commonplace,

there is increasing emphasis on enhancing employee involvement, team decision-making,

and various partnership arrangements (Dimitriades 2001).

There are so many different elements associated with the components that are related to

the subject of employee satisfaction, that many different sources originating from

periodicals, books, white papers, and dissertations are used and referenced in this paper.

Literature provides various interpretations concerning the change organization

development strategies of management in generating desired outcomes. There is the

suggestion that many “change” initiatives have employee cooperation towards reaching

mutual interests (Ascigil 2003). Many studies attributed a majority of improvement in the

area of employee satisfaction as a by-product of improved communication within the

organization. Extensive research results show that people derive greater satisfaction from

their jobs and perform to a higher standard when they are engaged in their workplace. An

integral and very important factor of engagement is the ability to effectively

communicate (MacGregor 2006). Another study that examined effective employee

communication in the workplace highlights the fact that without communication, nothing

could be accomplished. Communication involves three essential elements: a message,

someone to send the message and someone to receive the message. Effective

communication can only take place when the intended message reaches the intended

285


recipient, and the message was understood with the intended meaning of the sender

(Slagle 2006).

There is ample literature and research available that suggests employee recognition and

motivation programs have a great deal to do with improving employee satisfaction. The

main reason for providing an employee recognition program is to reap the benefits in

morale and greater productivity resulting from a program that is clearly defined and in

which the employees feel they can earn recognition for exceptional work (Roche 2006).

The implementation of effective award and recognition programs can create a positive

working environment that encourages employees to thrive. “Recognition makes

employees feel valued and appreciated, it contributes to higher employee morale,

increases organizational productivity, and can aid in recruitment and retention” (Brintnall

2005). Most of the literature made the connection between an increase in employee

satisfaction and the subsequent positive impact on customer satisfaction. Recognition

programs can help to define standards of performance, and establish guidelines for

evaluation methods of employee behavior. Happy workers, high productivity and strong

customer satisfaction characterize high performance workplaces (Recognition 2006).

Customer Satisfaction

The literature available on the subject of improving customer satisfaction is just as

prevalent as the information available in regard to improving employee satisfaction.

Many different studies focused on the abilities of new technologies to drastically improve

customer service. Businesses are now able to personalize and improve interactions with

286


every customer, and across every point-of-contact, thanks to new technologies for

information capture and analysis. Customers receive precisely the information they need,

when they need it and how they need it, while businesses are able to manage relationships

more effectively, efficiently and profitably through all avenues of interaction (IBM

2006). Many studies suggest the need for organizations to focus on their level of service

delivery to the customer. Increasingly, the only thing that separates one business from its

competitors is the level of service provided (Saxby 2006).

Most companies lose 45% to 50% of their customers every five years, winning new

customers can be up to 20 times more expensive than retaining existing customers (Full

2006). The higher the level of satisfaction that customers experience, the greater the trust

and confidence they show. As this trust and confidence grows, they will be less likely to

move their business for a few percentage points (Castiglione 2006). When it comes to

measuring their customers’ satisfaction, too many companies have settled into a

comfortable rut of changing their approaches to get the results they want (Columbusn

2005). “Competitors that are prospering in the new global economy recognize that

measuring customer satisfaction is key. Only by doing so can they hold on to the

customers they have and understand how to better attract new customers” (Cacioppo

2000).

A good amount of the literature regarding the improvement of customer satisfaction

considered the importance of measuring what matters to customers. This information is

critical to understanding exactly what you need to fix. For example, if the customers are

287


particularly dissatisfied with some aspect of the organization’s service, but it is

discovered that the thing they are unhappy with is not important to them, then the

organization can focus on what is important for increasing customer satisfaction

(Measuring 2006). An effective way to measure and gauge customer expectations and

satisfaction is through the use of Customer Relationship Management tools. Maintaining

control of customer relationships is possible only through consistent implementation of

classic, well-proven customer bonding techniques, such as individualized customer care

and communications, rewards for customer value and loyalty, special consideration for

high-value customers and customized products and services (Ferruzza 1999). According

to the literature, implementing customer relationship management strategies is the most

effective way to accomplish this.

Numerous empirical studies show a strong positive relationship between employee

satisfaction and customer satisfaction. One study in particular, found that, depending on

market segment and industry, between 40 and 80 percent of customer satisfaction and

customer loyalty was accounted for by the relationship between employees and

customers (Bulgarella 2005). A basic psychology switch in employees mirrors the

psychological changes in an organization’s customers too. Most often, the customers’

relationship with an organization comes down to their relationship with the

organization’s employees (Borland 2006). Customer satisfaction and loyalty invariably

are earned by delivering excellent customer service, and the human touch is often the key

differentiator. Additionally, customers with higher lifetime value have learned to expect

more. “Gold” customers often bypass automation and directly deal with support staff to

288


get their problems resolved (Uckun and Matan 2007). Putting employee and customer

satisfaction in the spotlight when planning strategy is one of the priorities for

organizations committed to continuous improvement, both internally and externally

(Greenberg 2006).

Customer Loyalty

“Tracking customer satisfaction alone is no longer sufficient and is often misleading. But

when combined with two other factors – loyalty attitudes, and needs and discretion – it

can play an important role” (Gokey and Coyles 2001). The real essence of customer

loyalty is finding ways to take advantage of opportunities for customer contact and

service. It is critical to tap as many as possible to create lasting loyalty (Kindinger 2005).

Many recent studies provide empirical evidence of something many in business already

know: customer loyalty is a key driver of profitability. The most important basis for

strategy development, however, is a comprehensive understanding of what drives

customer loyalty and how strong those drivers are (Teegarden and Krok 2006).

Companies know they need to pay attention to their customers. They know the financial

benefits that come from keeping their customers happy. And they’ve done their best to

put “satisfaction” programs in place. Yet regular monitoring of various U.S. industries

reveals that relatively few companies (17%, as of 2000) have improved their customer

satisfaction index measures after six years (McEwen 2005).

“There is an abundance of literature that draws the connection between the attitudes of

employees and the attitudes toward the company of the customer. Numerous studies

289


support the claim that employees with favorable attitudes provide better customer service,

and in most cases, improve the quality of customers’ experience” (Johnson 2006). The

research asserted that it is not enough to just deliver great customer service; it is

necessary to translate this great service into customer loyalty. The best way to engender a

greater degree of customer loyalty is to exceed customer expectations and anticipate their

needs. Expectations are constantly evolving because improvements in service shift

customer demands. While customers initially appreciate better services, they quickly get

used to, expect and demand them (Cleveland 2003). Customers will continue to favor

organizations that provide unique, one-on-one, personalized service, whether it is

delivered face-to-face or over the Internet (Colombo 2006).

Corporate Profitability and the Service Profit Chain

There were very few relevant papers available that incorporated the elements of

employee satisfaction, customer satisfaction/loyalty, and corporate profitability into one

theory known as the service profit chain. The pre-eminent work on this subject can be

found in the research of James L. Heskett, W. Earl Sasser, Jr., and Leonard A.

Schlesinger, who together, coined the phrase service profit chain. Their book by the same

name connects the importance of the relationships that exist between employees,

customers, and corporate profitability. “Simply stated, service profit chain thinking

maintains that there are direct and strong relationships between profit; growth; customer

loyalty; customer satisfaction; the value of goods and services delivered to customers;

and employee capability, satisfaction, loyalty, and productivity” (Heskett, Sasser and

Schlesinger 1997).

290


Many papers set out to link either improved employee satisfaction to improved customer

satisfaction, or employee satisfaction to improved corporate profitability, or improved

customer satisfaction/loyalty to improved corporate profitability. There is also the

opportunity to move that marginally profitable customer into profit if an organization

understands the customer dynamics involved and are able to either find a way of lowering

the cost to serve or finding them more mutually profitable services to take (Meltzer

2006). You need to know how much it costs to service your existing customers and how

much profit they bring the organization. But who are the customers you want to retain

(and why) and what are the characteristics of customers you want to acquire (Meltzer

2003)? Very few papers made a comprehensive connection between the employee, the

customer, and corporate profitability. Either one are relating to one other area was

connected, or just one of the elements was analyzed.

Chapter 11

RESEARCH METHODOLOGY

Objectives

The objective of this dissertation is to contribute to the existing knowledge base related to

employee satisfaction and customer satisfaction as important contributors to corporate

profitability. A comprehensive and in-depth literature search was conducted to assess the

level of existing research and knowledge base in order to assess areas that could benefit

from further analysis.

291


Research Approach

An initial assessment of existing research relating to the elements of employee

satisfaction, customer satisfaction/retention/loyalty, and the elements of corporate

profitability was conducted in order to identify and focus on essential elements that

would be beneficial for this dissertation. This was followed by a more comprehensive

analysis of existing research for the purpose of identifying those works that best

explained the concept of the service profit chain. This process included industry specific

literature searches using Proquest, URSUS, MARVEL, and college search sources at

Harvard University, Northeastern University, and the University of Maine. In addition to

these databases, searches for materials in many business periodicals such as Harvard

Business Review, The Economist, and HR Digest were conducted. The results of these

searches aided in identifying empirical research and published analysis related to

employee satisfaction, customer service, and corporate profitability.

Surprisingly, with the innumerable literature available on employee satisfaction,

customer retention and corporate profitability, very little at all examines each in detail

and analyzes their effect on one another. Searches for literature pertaining to the service

profit chain, or similar works, produced only a handful of results, most of which are

attributed to the previously mentioned authors of the book The Service Profit Chain.

Because of this, extensive searches were conducted on the different elements of the

service profit chain, then compiled and analyzed in this paper.

292


The lack of congruity and continuity in the existing literature between the relationships of

the three main elements of the service profit chain are therefore the focus of this paper. In

order to enhance the application of the research found in the literature, structured, as well

as unstructured interviews were conducted with industry professionals on every facet of

the service profit chain.

Certain questions were provided to the interviewees in advance of the actual interview,

along with a brief description of the purpose of the interviews. During the actual

interview process, the respondents were given the latitude to expound on the subject

matter in an unguided fashion, as they are all considered to be expert professionals in

their respective disciplines. The objective of the interviews was not to elicit fixed

responses, but rather to garner additional information on the differing aspects of the

service profit chain that would enhance the current literature. The respondents all agreed

to allow their identities and comments to be disclosed in any appropriate manner that

would allow the information they provided to enhance the body of knowledge associated

with the paper.

Method of Data Collection

Face-to-face interviews were conducted and notes taken to document the answers of the

interviewees for eleven of the fifteen interviews. The remaining four interviews were

conducted using e-mail in a question and answer format. Most interviews lasted no more

than thirty minutes at one time. However, more than a total of ten hours was spent

interviewing John Reed the CEO at Maine Savings and Robert Carmichael, the Vice

293


President of Human Resources & Training at Maine Savings. All of the respondents were

cordial, informative, and eager to answer questions in a comprehensive manner.

Selection and Description of Interviewees – CEO, V.P., A.V.P., and R.V.P.

Because of the large amount of literature available in regard to the three elements of the

service profit chain, the interviews were used to help identify and confirm the

information found in the written analysis. There was no expectation that the interviews

would garner any previously unknown information. There was an expectation that the

interview process would reveal different methods of application of the information,

which it did. In order to garner the most comprehensive input possible and have the

ability to identify similar information that would be used to add to the body of knowledge

relating to the research in this paper, only recognized industry professionals were

interviewed. As part of this process, two CEO’s, two Board members, four Vice

Presidents, an Assistant Vice President, and two Regional Vice President’s were

interviewed. Everyone in this group currently works professionally in Maine. However,

all of them have experience across the U.S., and two of them have extensive international

experience.

Selection and Description of Interviewees – Chief Executive Officers

A total of two interviews with CEO’s was conducted, both of which were conducted

face-to-face. In the case of John Reed, the CEO at Maine Savings, several comprehensive

interviews were conducted.

294


Selection and Description of Interviewees – Vice President of Human Resources &

Training

The person occupying this position at Maine Savings, Robert G. Carmichael has

extensive international human resources and training experience and is a retired Brigadier

General with the United States Army. In his capacity as the Assistant Adjutant General,

he was responsible for the training and development of thousands of soldiers. Rob has

written extensively about employee satisfaction and has designed many employee

development programs for several different organizations.

Selection and Description of Interviewees – Vice Presidents (Lending, Operations,

Finance)

A total of four Vice Presidents with extensive experience in Lending, Retail Operations,

Human Resources, Finance, and Logistics were interviewed. The interviews were all

face-to-face and were preceded by a list of five standard questions. The feedback of these

interviewees acted to verify many of the assertions found in the literature regarding

employee satisfaction, customer retention, and corporate profitability.

Selection and Distribution of Interviewees – Regional Vice President’s

Two Vice Presidents with extensive retail banking experience were interviewed. The

interviews were initially conducted via email and were followed up with phone calls.

These interviews centered on the operational application of human resource theory in the

295


workplace. The perspective’s of these individuals was in line with the research conducted

in the literature.

Selection and Description of Interviewees – Board of Directors

Two members of the Board of Directors at Maine Savings were interviewed. Each has

been a long-time member of the Board and both have seen the benefits of the

implementation of the service profit chain strategy at Maine Savings. These Board

members were able to give perspectives in regard to Board governance of such initiatives.

Selection of Description of Interviewees – Assistant Vice President of Accounting

An A.V.P. of Accounting with more than twenty years of experience in all aspects of

banking was interviewed. The interviews were held face-to-face and occurred several

times. This A.V.P. was able to give perspectives of both financial management and as an

employee working their way up through the organization.

Chapter 12

Interview Results

CEO, Vice Presidents, and Board Members

Service Profit Chain

Of the executives that were interviewed, one CEO had not implemented a strategy similar

to that of the service profit chain strategy, although he had extensive experience

managing the three main elements that make it up. The initial question was in regard to

the importance of the relationship in business of employee satisfaction, customer

296


satisfaction/retention, and corporate profitability. The responses for the most part, were

very similar to one another. All of the executives felt that each component was important

to the overall success of any organization and that attention should be paid to all of them.

The next interview question was in regard to which of the three components was the most

important. One of the executives responded that employee satisfaction was the most

important because without employees, there would be no business. Another executive

responded that customer satisfaction and retention was the most important because

without them there would be no income for the business to pay employees. Yet another

executive asserted that the money had to be available in order to hire and keep satisfied

employees which in turn, creates satisfied customers that add to an organization’s

profitability.

Most of the interviewees came back to the conclusion that all of the elements were

equally important to the business equation and necessary for organizations to grow and

prosper. The interviews however, took and aggregate or overall approach by the

respondents to the issue unless otherwise directed by the interviewer. Because of this, the

interview questions were designed to go into further detail with regard to the three main

elements of the service profit chain. As the following interview results will show, the

responses to the questions were heavily weighted based on the executive’s area of

responsibility within their respective organizations. For example, the human resource and

training executive tended to favor the elements associated with employee satisfaction,

297


while the executive responsible for retail operations tended to favor the elements

associated with customer satisfaction/retention.


The interviewees were asked to list, in order of importance, the elements associated with

employee satisfaction. The top five responses were fairly uniform between respondents

with such items as remuneration, sick/vacation time, hours, training, and advancement

opportunities being the most often cited. One executive was adamant about pay being the

most important because employees that do not feel adequately compensated are incapable

of further motivation. He cited an example of one of his long-time employees that did a

capable job at her assigned duties, but would do nothing extra, fretted when cross-

training was mentioned, and was not motivated to learn anything new. He added that her

favorite slogan was “eight and out the gate”, referring to working her eight hours and no

more, then going home. He said that when the employee was finally confronted about this

attitude, she responded that she was only paid enough to perform the basic duties for

which she was hired.

The human resource executive cited many examples of different employees being

motivated by different motivating factors such as flexible hours, more time off, a

different work environment, a training opportunity, or a new position, just to name a few.

His assertion was that employees all have different motivators and it is up to the

supervisor, and ultimately the organization to identify those motivators in order to foster

an environment that the employee will be satisfied with and excel in. He gave numerous

298


examples of employees that seemed to be having an issue with one or more parts of their

performance and when the issue was discussed, it was found that there were varying

problems that were unique to the individual employee.

An executive from a much smaller institution offered a different opinion that was not

shared by any of the other interviewees. His opinion was that all lower level employees

should have a fixed pay rate, given to them up front, with a delineated set of tasks that

they were to perform. If they desired further training or motivation of any kind, it was up

to them to make a formal request to their immediate supervisor. He believed that if the

employee were informed of their rate of pay and expected duties up front, there would be

no gray area or opportunity for misunderstanding or miscommunication. When he was

asked if he thought that this would work in a larger organization, he admitted that a

variation of this style would have to be implemented in order to be effective.

The Board members however, were on the other end of the spectrum with their responses.

Their responses were very liberal in regard to benefits that employees should receive.

One Board member even commented, “what ever will ensure the satisfaction of the

employees is what we should do.” Their responses to questions regarding employee

satisfaction were difficult to gauge in comparison to the other interviewees responses

because they were so skewed toward the employee. When asked about the costs of some

of these benefits, they tended to think that enough money could be found in the

organization to satisfy the requests. In their opinions, satisfied employees (at all costs)

made for satisfied customers, which in turn, made for a profitable organization.

299


The interviewees were asked if any of them had ever participated in a 360-degree review

of the elements associated with employee satisfaction in the past. The question was

subsequently revised to add, “making employees a core part of organizational goals and

the strategic plan.” Most of the interviewees had been involved in several aspects related

to the elements associated with employee satisfaction, with one, the human resource

executive actually being involved in the implementation of the service profit strategy in

the past. The HR executive’s past experience in relation to implementing employee

satisfaction into the strategic plan and organizational goals proved to be a positive one.

The executive made the determination that in order to correctly assess all aspects relating

to employee satisfaction, it was first necessary to start at the top with senior management.

Once there is a decision to incorporate employee satisfaction measures as part of

organizational goals, then every aspect of the initiative can be examined and is open for

criticism and change, if necessary.

Interviewees were asked about communicating to employees. Specifically, what, when,

and how should employees be communicated to. The interviewees, on the whole, said

that open and honest communication was essential to the success of the organization. One

interviewee related an experience he had at a previous position in relation to employee

communication. He stated that the employee turnover rate was more than three times

higher than the peer average at this particular organization. He soon began instituting exit

interviews as part of the standard operating procedure for this company, which did not

previously exist. In almost every exit interview, employees made comments about the

300


lack of communication from management and indicated their frustration with the

communication process in general of the company. After further investigation, the

executive found that there was little to no communication between management and

employees and visa versa. This created an atmosphere of distrust, mystery, and

speculation. In order to remedy the situation, the executive instituted a daily management

e-mail to employees and created an employee newsletter to act as a bilateral

communication tool for the company. Within a year, the turnover rate was cut by more

than seventy-five percent.

Because most of the interviewees had only been involved in certain elements of

employee satisfaction, they were unable to relate their experiences to overall changes in

the organizational culture. Even still, some of the executives related certain experiences

in regard to elements of enhancing employee satisfaction that were helpful illustrations

and examples of the process at work. Two of the executives had positive experiences that

were a result of additional employee empowerment. In one case, front-line employees

required the verbal and written approval of management in order to effectuate a decision

resulting in greater than five dollars. This was causing a tremendous amount of

contention with both employees and customers alike. The executive said that this

company was a privately held family company and that the policy had been this way

since the original owner established it in the late 1940’s. With his input, the rest of the

senior management team decided to provide additional training to employees on certain

decision-making processes that they may encounter on the front lines. Shortly thereafter,

they amended the policy to read five hundred dollars rather than five dollars. The change

301


in attitude of the employees was almost immediate, and shortly thereafter, positive

comments from customers came pouring in.

There was an overall difference of opinion between the executives in regard to the extent

to which an organization should go in order to increase employee satisfaction. The human

resource executive and his colleagues that had dealt with human resource issues for a

long period of time tended to convey the attitude that an organization should do anything

in its power to ensure high levels of employee satisfaction. The executives that had little

or no exposure to human resources and were more geared toward logistics and operations

tended to have the opinion that once a “good” package was created and offered, it was up

to the employee to be satisfied with what was offered. The human resource executive’s

answer to this point of view was to insist that an organization must continually work with

its employees to ensure an environment where employees have the ability to increase

their level of satisfaction.

Customer Satisfaction/Retention

The executives and Board members were given an initial question that read, “what are the

most important elements of customer service?” The majority of their responses were

much the same and included answers like: being friendly, approachable, knowledgeable,

convenient, and flexible. The next questions were based on the differences noted in the

responses to the first set of questions. The questions centered on the importance of

employees in delivering great customer service, as well as the impact on corporate

profitability as a result of satisfied customers. The interviewees were also asked if

302


satisfied customers were loyal and profitable customers. Their responses varied and were

wide-ranging, generally reflecting their positions within the company or on the Board of

Directors. All of the respondents did agree however, that satisfied customers were

essential to corporate profitability.

The human resource executive attributed much of the customer satisfaction measure to

the level of satisfaction the employee who engages the customer possesses. His opinion

was that the employee is the face of the organization and the initial contact point for the

customer. He added, “if the store looks great, the product essential, and the price is right,

none of this matters if the employee engaging the customer fails to deliver the service and

support necessary in order to make the customer feel special.” When asked if employee

satisfaction cannot only add to customer satisfaction, but also create customer loyalty, the

executive initially replied, “it depends.” Upon further reflection, he did say that more

factors were involved in creating customer loyalty and retention than are involved in

customer satisfaction.

One of the retail operations executives was asked, “what is meant by being considered a

“customer-centric” organization?” He responded that when an organization is considered

to be customer-centric, it will go to any length possible to ensure customer satisfaction. In

his experience, a company deciding to become customer-centric must take action toward

this goal, not just make the statement. This executive actually had experience with this at

two different organizations in the past. One initiative succeeded, while the other failed. In

his first experience, the CEO called the executive team together and cited his concern that

303


he felt the organization was losing many of its customers to the competition. His idea was

to become a “customer-centric” organization, making decisions for the customer

whenever possible. His first order of business was to create a new mission statement

declaring that the organization was a ‘customer-centric” organization. He subsequently

called a special company meeting and gave a speech declaring that the company was now

a “customer-centric” organization and that the customer was the first priority. Everyone

seemed to leave the meeting feeling excited about the prospects of garnering more

business because of the new focus and mission statement. However, there was no

incorporation of the philosophy into the strategic plan, no additional training, no financial

commitment to the initiative, and no tangible effort put toward making the organization

any more customer-centric than it was before. Soon, the employees realized that they had

always tried to deliver great customer service and whenever possible, put the customer

first and give them what they wanted. To them, it became evident in a very short amount

of time that nothing had really changed. Inevitably, the organization continued to lose

market share to the competition and the senior management team all left within twelve

months of the “customer-centric” proclamation by the CEO.

In his second experience with an organization attempting to become “customer-centric”,

the executive had quite a different experience from the one he had at his former company.

In this situation, The CEO assembled the executive management team for the purpose of

discussing the concept of the customer-centric organization. In this meeting, the CEO

passed out literature and examples in regard to companies that had successfully made the

conceptual change to a customer centric organization. The CEO gave the team two weeks

304


to read through the materials, write down their ideas, assemble suggestions, then they

would meet to discuss the results.

When the team met two weeks later, they drafted a budget to support the initiative that

included funding for additional training, marketing to customers, funding for customer-

based initiatives, and funding for additional staff to support the initiative. In addition, the

team reworked the strategic plan to reflect the organization’s new focus as a customer-

centric organization. The final task for the team was to create a priority list for

implementation. Once this was accomplished and the team had a plan of action, a

meeting was held with the employees of the company in order to present to them the plan

and how it would be carried out. The outcome of this initiative produced an increase in

customers for the organization of more than thirty-percent in just six months. In addition,

the organization’s profitability per customer ratio increased by just more than twenty-five

percent in the same time period.

Several of the executives discussed the issue of empowerment as being the key to

increased customer satisfaction/retention/loyalty. The executives were asked if their

comments in regard to empowerment were in reference to empowered employees being

able to provide better customer service. One of the executives answered that it was a

combination of both employee and customer empowerment. He stated that in a truly

customer-centric organization, customers are also empowered to make decisions that they

have not traditionally been able to make. He indicated that this ability to have more say in

305


the outcome of a transaction and experience equated to increased empowerment on the

part of the customer.

In many of the interviews regarding customer service, the executives spoke more about

employee satisfaction than they did about direct initiatives that could lead to increased

customer satisfaction. The interviewees would begin to relate certain initiatives that could

improve customer satisfaction, and soon be talking about the “employee” effect on that

element of customer satisfaction. The most prevalent sentiment was in regard to the

impact of employee empowerment on increased customer service. One executive

commented that most organizations recognize that at some level, customers are important

to their business and their satisfaction is important. His opinion was that many companies

fail at customer satisfaction when they install frustrating bureaucracies that act as a

barrier for the employee to deliver the best customer service possible. He noted that

organizations that allow employees to break down these bureaucracies for the benefit of

the customer are organizations that tend to have a more loyal customer base. His

conclusion therefore, was that employee empowerment can be the element that has the

greatest effect on customer satisfaction.

The interviewees were asked about the importance of meeting customer expectations as a

part of enhancing customer satisfaction and loyalty. Many of the responses were to the

effect that they believed that their organization already understood their customers’

expectations and worked to fulfill them. The interviewees were then asked if their

customers’ expectations were being met then why was their customer acquisition flat.

306


Many of them blamed the economy and the consumers’ hesitance to move from one

competitor to another under the uncertain circumstances. However, one interviewee did

comment on the fact that in many cases, organizations think they understand customer

expectations but don’t and in most cases, they do not ask or endeavor to really find out.

This executive explained an experience he had while at another financial institution in

relation to customer expectations. The institution was opening a new branch and was

trying to decide what the hours should be for the branch. Subsequently, the management

team looked at the competition’s hours and decided that they should have the same hours

because that is what their customers would want. After the new branch had been open for

six months, a transaction analysis was done on the new branch. This analysis revealed

that less than twenty customers per week were taking advantage of the extra hours

established at the branch. The management team decided to poll its customer base as to

what their choice for hours at the new branch was. In the end, the customers

overwhelmingly decided on very different hours that would be convenient for them. The

institution changed the hours and within a week, they saw that more than five hundred

customers had used the new hours to perform some kind of transaction.

The Combination of the Three Elements That Form the Service Profit Chain

Directly after the first round of interviews, the executives were provided some excerpts

from the book The Service Profit Chain by Heskett, Sasser, and Schlesinger (1997), as

well as some other literature on combining the three elements in order to increase

corporate profitability. For executives that were interviewed a second time, they were

307


asked about their opinions of employee satisfaction, customer retention/loyalty, and

corporate profitability, after having the benefit of reading the associated materials that

were provided to them. Only one out of this group of executives had actual hands-on

experience implementing a service profit chain strategy. In order to allow for idea

building and brainstorming feedback, two senior executives were interviewed at the same

time while these particular questions were asked.

One of the executives who previously focused most of his attention on employee

satisfaction during previous questioning now said he believed that all three elements must

be considered equally if the initiative were to succeed. He agreed now that concentrating

so much on one element (employee satisfaction) is a myopic way to view things and does

not allow an organization to implement a balanced plan. He added that after being able to

read some of the literature, he now understands the importance of the relationship of one

element to another and visa versa. This executive mentioned that although the

organization he was previously with considered itself to be customer-centric, because he

put so much focus on the employee aspect of the solution, the organization in truth was

probably employee-centric. The other executive agreed that too many times, one or

another element is highlighted or made a priority at the expense of the other two. Both

admitted that in order to maintain a balanced approach to the service profit chain strategy,

a complete view of the individual initiatives should be analyzed before acting.

One executive had an analogy of a misguided initiative from a previous place of

employment. In his story, the organization was striving to become more customer

308


focused by attempting to empower the customer in more ways. One of the ways that they

tried to do this was by introducing a new initiative that they publicized to the customer

called “the customer empowerment” program. This program stated that if a customer was

dissatisfied with their service or a decision from a particular employee, they could just go

to another employee and achieve what they were trying to get. The purpose was to try to

let customers know they have a choice in their service and with whom they deal with at

the employee level. This initiative backfired in a very short amount of time. The result

was that the employees did not feel empowered and it actually caused problems between

certain employees, and eventually entire departments within the organization. In

hindsight, the organization should have empowered the employees more to service the

customer better. However, in this case, one of the elements was given priority at the

expense of another very important consideration.

The executives admitted that this experience had been eye opening and at the same time,

somewhat embarrassing. Each of them told of experiences they had where they pushed an

initiative they though was an important part of the solution that they now realize was at

the expense of another element in the service profit chain. The most senior executive

interviewee, a CEO of a large financial institution, related the experience he had in

making a decision he thought was beneficial to the customer, but in the end, negatively

affected the organization’s profitability. The interviewee had received several complaints

from customers in regard to their credit card skymiles being stale dated and subsequently

canceled. Because he thought this was having an adverse impact on all customers, he

mandated that the stale dated skymiles for all customers be reinstated. The subsequent

309


bill from the credit card processor for this was $130,000 and ended up only affecting

twenty-two customers in an adverse manner. In the end, the executive realized that he

should have calculated the opportunity cost risk of the decision better.

Interview Results Summary

As was previously stated, the interviews for the analysis contained in this paper were not

the primary basis for the research, but rather they were used as additional sources of

information and observation. The primary research and foundation for the analysis

contained in the paper is from the literature.

The information ascertained from the interviews was valuable and helpful in gaining a

practical viewpoint of the theory presented in the literature research. The professional

experiences of the interviewees was invaluable at helping to understand the importance of

considering all three main elements of the service profit chain equally and in a balanced

manner. The resounding consensus of this researcher and the interviewees is that

although improving one element at a time can be beneficial in many ways, it is far more

important and effective to consider all of the elements as part of an initiative.

Chapter 13

Summary, Discussion, Conclusions, and Limitations


Having and maintaining a highly satisfied workforce is a key factor in improving

corporate profitability. Organizations that understand the elements involved in employee

satisfaction maintain an important competitive advantage over their competition.

310


Addressing or improving employee satisfaction within an organization is a process that

deserves planning and commitment on the part of the senior management team and is not

something that will happen overnight. Many companies attempt to address specific

elements related to employee satisfaction, but very few actually analyze every component

to ensure a comprehensive approach to the issue. As this paper has shown, employee

satisfaction consists of more elements than just benefits, pay, or job description. In fact,

many elements related to employee satisfaction are often times overlooked or relegated to

areas totally unrelated to human resources. No organization with employees is exempt

from the responsibility to examine the elements necessary to improve employee

satisfaction. With the impending shortage of workers due to the upcoming retirement of

“baby-boomers”, attention to the satisfaction of employees is not only prudent but also

necessary to maintain a satisfied and motivated work force.


Without a supportive and committed leadership team, employee satisfaction initiatives

are predestined for failure. Any employee satisfaction related initiative must be supported

and championed by the leadership team of an organization. The executive team must

adopt a well-thought out strategy to ensure that their best people will remain engaged and

ready to help lead the economic rebound. “There must be a top-down vision that can be

articulated and shared by every member of the leadership team” (O’Connor 2004). In

order for employees to feel that initiatives will be successful, they need to see that the

leadership of the organization is supportive of the initiatives. Working with a leader who

does not provide support, show consideration, or engages in hostile behaviors can be

311


stressful for employees. Negative leader-employee interactions can result in decreased

pleasure with work, questioning one’s skill on the job, reacting harshly to the leader, and

eventually leaving the organization (Chen and Spector 1991).

Considerate leaders, also known as expressive leaders because they show concern for

people, have been found to facilitate a group of employees with higher productivity and

higher performance (Singh 1998). The research is quite clear that a participative

leadership style that takes into account the input of employees and treats workers as

partners in the business, is far more effective at creating and maintaining real employee

satisfaction. On the other side of the coin, task structured leaders, also known as

instrumental leaders, show less concern for employees and are high on initiating

structure. Leader behavior characterized as high on initiating structure leads to greater

rates of grievances, absenteeism, and turnover and lower levels of job satisfaction

(Robbins 1998). Although the relationship between concern for employees and job

satisfaction is not always clear, research in this area generally indicates that consideration

is more highly related to satisfaction than a task structured style of leadership (Wilkerson

and Wagner 1993).

Work Environment

Work environment considerations are quite often one of the overlooked aspects of

employee satisfaction. There are two primary categories that make up work environment;

physical, such as workspace and location, and interaction with other employees. These

two considerations are very important to both the physical well-being and the

312


emotional/psychological well being of the employee. In order to maintain a feeling of

satisfaction, employees must be given the opportunity to work in the most comfortable

and appealing physical setting as possible. Also, employees should be given the

opportunity to work in an environment with others that is respectful, amiable, and free

from hostility or abuse.

Organizations that pay attention to and realize that creating an inviting work area that is

open to productive collaboration with other employees often reap the rewards of greater

productivity and satisfied employees. Far too often offices and other work areas are

designed to facilitate the maximum use of space at the expense of what will encourage

worker productivity and increase worker satisfaction. The design of contemporary office

environments is often based largely on intuition derived from personal experience or

from highly simplified accounts of the academic literature applied without reference to

this literature’s underlying association of physical design with the nature of work

(Heerwagen 2004).

Organizations have a fiduciary duty to provide their employees with a workplace that is

free from hostility or threatening co-workers. An employer has a responsibility to provide

a safe and effective mechanism for reporting experiences. If there is a history of people

using that vehicle and being punished for doing so, it can be argued that the employer has

failed to provide such a mechanism (Parham 2003). Allowing or tolerating

psychologically or detrimental behavior in the workplace not only carries with it legal

ramifications, but also the negative implications for employee satisfaction. This negative

313


impact on employee satisfaction will soon manifest itself in the form of poor customer

service and consequently, negative ramifications for corporate profitability.

Employee Training

This paper has established that employees should be considered valuable assets that are

capable of continued earning capacity for the organization if invested in and cared for

properly. Many organizations have regular maintenance schedules for their machinery

that includes preventive care, and in many cases, upgrades in order to improve

efficiencies and streamline production processes. Organizations can benefit from

applying this methodology to their human workforce as well. The training an

organization provides its workforce should be planned, funded, and relative to the goals

of the organization and employee.

Training has become a necessity in today’s workplace due to rapidly changing

technologies, customer expectations, and the ever-changing business environment in

which we operate. Organizations can centralize and formalize their training programs in

order to provide a planned avenue for employees to increase their skill and knowledge

levels. Research in the area of corporate training has shown that companies that invest in

their employees through comprehensive and effective training programs have less

turnover, more productive employees, and consequently are more profitable. These

training programs also offer the organization the ability to identify those employees that

have the capability and desire to grow further and progress upward within the

organization.

314


Employee Development and Leadership Planning

Employee development and leadership planning is closely related to corporate training,

but is the next step in employee advancement. A major factor in engendering employee

satisfaction is the known ability by the employee that they have potential opportunities

for development and promotion at their organization. It is quite clear from the analysis in

this paper, as well as other empirical research on the subject, that employees who are

afforded the opportunity for continued development and leadership add to the success of

an organization. By retaining employees, the value of their development increases. They

will increase productivity and contribute to the over-all success of the organization. Their

expanded knowledge makes them valuable assets for the company. Over time, this added

value will more than cover the costs of their development (Garavan et al. 1998).

Organizations should work with their employee base to create a development plan that

will truly enhance the leadership skills of the employees for future promotion.

Organizations that work with their staff to assess and provide feedback on their skills and

interests, assist in selecting development activities that match their career development

objectives and job needs, tend to have seasoned and satisfied leaders. The key function of

the development process should be to identify and cultivate leadership for the future of

the company. Although employee development initiatives are typically associated with

lower level employees, senior level executives can benefit from continued development

training as well. Executive development programs should enhance an executive’s

leadership abilities in terms of profits and reducing costs. Leadership models help to

315


define actions required by managers. This leadership emphasis is reinforced in the

organization through effective and responsible managerial staff (Mailliard 1997).

Employee Recognition

Employee recognition programs are an important part of creating and sustaining

employee satisfaction. However, these programs must be administered fairly, correctly,

and in the right quantity. Having too few employee recognition awards or too many is

another mistake to be avoided. Awards should be rare enough to be sought after, but

common enough that every employee believes they will earn recognition for exceptional

work performance. The higher level awards should be quite difficult to obtain to remain

truly meaningful (Roche 2006). Recognition programs are in integral part of continuous

employee motivation and act as positive behavior modification tools when administered

correctly.

Someone who is commended for an achievement usually responds by producing even

better results. Ultimately, the employer can expect that the result will translate into cost

savings, quality improvements, and strengthened customer relationships (Recognition

2006). Managers can use recognition as a leadership tool. It can convey a strong message

to employees regarding the work performance and behavior that is valued by their

managers. By communicating these essential values, employees will understand how

their performance directly contributes to the organization’s ability to achieve its goals

(Brintnall 2005). Not only do employees benefit from employee recognition programs,

but so too do their organizations. Employees receive recognition for their outstanding

316


achievement and organizations get more satisfied employees, as well as behaviors and

results they set out to enhance in the first place.


Far too often, employees are treated like pieces of machinery. They are selected, staged,

and programmed to operate the way that the organization wants them to in order to

achieve a certain predetermined goal or objective. The research has shown that

organizations that involve their employees in setting organizational goals and employee

expectations experience much higher rates of employee satisfaction than those

organizations that do not. Organizations that take into account the input of their

employees are often referred to as “collaborative work communities” in the research.

“Collaborative work communities” can be defined as a group in which people work

effectively together to achieve business results and sustain a positive work environment

that includes work/life balance. In addition, collaborative organizations create structures

and practices, and express values that help groups work effectively across organizational

boundaries to achieve business results (Gewirtz 2005).

The Hawthorne studies that began in 1927 studied the effects of different environmental

inputs on employees and productivity. The studies eventually concluded that the

productivity of workers increased simply because the researchers were paying attention

to them and not because of an identifiable input or variable. There are many

organizations that share goal setting ad the creation of employee expectations with their

workforce, but arguably, none better than Southwest Airlines. Southwest Airlines has

317


learned to capitalize on the principles of the Hawthorne Effect. “Since the company’s

inception in 1971, it has been committed to employee input. In an industry plagued with

business failures, it is staggering to reflect on how Southwest Airlines has consistently

remained at the top of its industry, while placing a dogmatic focus on its employees’

feedback needs” (Frazee 2004).

Organizations that are successful at including their employees in decisions and the goals

of the organization are typically “flat” in hierarchal structure. It is hard for employees to

be motivated to get the job done when they do not know how their job contributes to the

overall success of the organization. Research has shown that goals have a direct effect on

the morale of the staff in an organization. People gain high morale when they are

challenged by organizational goals and know that they’ll be supported as they strive to

achieve them (Davis 2006). Organizational structure and employee involvement in

setting organizational goals and employee expectations have been found to enhance

employee satisfaction and have positive effects on organizational profitability.

Communicating With Employees

Effective communication in the workplace is one of the most important considerations for

both employees and the organization itself to consider. Ineffective communication in

organizations can have dire and immediate negative effects. Communication is a

powerful factor in organizational performance, in part because it is tangible evidence

about what the leadership believes the values for which the leadership stands (Harshman

1999). Research and case studies indicate that much of the communication in today’s

318


bureaucratic organizations does the opposite of what is intended; that is, it contributes to

a growing sense of mistrust and erosion of credibility (and faith) in the organization and

its leadership (De Greene 1982).

Communication is not only an important part of every organization, it is affected and

shaped by the culture of a workplace and therefore demonstrates and transmits the

characteristics of a workplace culture (Communication 2006). Communication affects

every element of employee interaction and satisfaction. Communication is used to convey

attitudes of management, work to be done, the direction of the organization, and to share

information with co-workers and management. Because there are so many forms of

communication available to employees, it is essential that these methods be understood

and used in a responsible manner. Specifically important in organizations is the

communication that takes place between an employee and their supervisor. Studies have

long shown that employees prefer to receive information from their supervisors. They

like to receive information from the organization’s leaders, but they want to hear the

impact on their work-group directly from the people to whom they report (MacGregor

2006).

As this paper addressed comprehensively, there are three main elements involved in the

communication process – a message, a sender, and a recipient of the message. However,

from these three main elements involved in the communication process, many different

issues can arise that corrupt or distort the process. For this reason, organizations need to

be vigilant at monitoring their internal communication processes. Communication is an

319


art, not a science and may differ from organization to organization. According to a study

conducted by the human resources consulting firm Watson Wyatt Worldwide,

organizations that communicated most effectively with employees experienced a return to

shareholders of twenty-six percent. In contrast, those organizations that communicated

least effectively produced a negative fifteen percent return. That is a forty-one percent

swing between companies that communicate well and those that don’t (Holtz 2006).

An essential element of the communication process within an organization concerns the

ability of employees to provide actionable feedback to management. Leadership must be

open to feedback. “Employees need to believe they have a voice in the company and that

their input matters. Leadership can’t claim they have an open culture while discouraging

two-way communication” (Varelas 2005). Just as important as respecting the employees’

feedback, is actually listening to what employees are saying. Listening is just as

important as speaking, when it comes to communication. Supervisors who are good

listeners are more likely to have employees who help identify and solve work-related

problems (Slagle 2006). In order to elicit positive feedback from employees, there must

be an avenue for this communication to occur. Employee surveys, if conducted correctly

can provide a good basis of upward communication about issues affecting employees that

management is not aware of. Employee surveys are an important tool used by

organizations to obtain the feedback of employees on a variety of critical issues (e.g.,

employee satisfaction, leadership effectiveness and practices, organizational culture and

climate, etc.) (Guidestar 2006).

320


Employee Satisfaction and Teamwork

Teamwork can be a source of employee satisfaction if it is managed correctly. On the

other hand, teamwork can also be the source of contention, employee conflict, and

counter productivity if not managed correctly. Teams do not automatically work well as

an entity. Effective teams require constant attention and managerial encouragement. The

strongest and most consistent factor that increases teamwork is managers encouraging

teamwork. When managers help employees work together as a team, resolve

disagreements and support team efforts, the groups as a whole exhibit greater

productivity and satisfaction (Special 2006). The research is clear that teams can be used

in organizations to help leverage knowledge and experience of the team members in

order to produce better results for the company. In addition, it has been shown that

employees are motivated when having the opportunity to work in effective team

environments.

An important factor in successful team strategies is the ability of management to allow

the team to reach its own conclusions and results without inserting itself unnecessarily

into the team forming process. “Critics of teamwork practices argue that despite positive

images like empowerment, autonomy, increased discretion and psychological

involvement resulting from team based initiatives, such strategies need to be examined

closely for such practices are often used to mask the managerial intentions to control”

(Sewell 1998). Management must realize that teams are their own entity and require

certain stages in order to operate efficiently and for the purpose intended. Employees

321


should be trained on the different aspects of team development and coached through the

process in order to have an understanding of the intent and purpose of teamwork.


An organization can realize many benefits from learning how to properly empower its

employees; not all of which are strictly monetary. An empowered employee helps a

company improve service delivery, continuously become more innovative, increase

productivity, and gain a competitive edge (Ten3 East-West 2003). Employee

empowerment comes from the individual. That is not to say that management ceases to

have the responsibility to lead the group and is not responsible for performance. In fact,

companies that seek to empower employees demand stronger leadership and

accountability (Smith 2003). Empowerment is a tool that must be used throughout the

organization and not just rest with certain employees on a random basis.

Employee empowerment is the subject of many business articles and seminars today.

Most organizations think they understands the benefits of employee empowerment and

are interested in implementing it because they believe that empowered employees will

benefit the organization. Organizations often do not pursue true empowerment because

they are afraid of giving up too much control and decentralizing the decision-making

process. This notion could not be further from the truth, as empowerment is allowing

informed employees to act in the best interest of the organization. “Employee

empowerment is a process whereby: a culture of empowerment is developed; information

322


– in the form of a shared vision, clear goals, boundaries for decision-making, and the

results of efforts and their impact on the whole – is shared” (Savage 2006).

Employee empowerment is a concept that if implemented correctly, is a benefit to all

those involved in the service profit chain. Organizations that cultivate a culture that

consists of performance-based rewards and empowerment tend to be more nimble and

adaptable to change (Clark 2006). Empowerment initiatives also force organizations to

change the way they communicate with employees, as it is necessary to communicate

things in greater detail and at more expedient paces. Empowering employees to improve

the organization will require greater amounts of communication than ever thought

possible. Management will be required to spend more time both giving and receiving

information (Hildula 1996).

Empowerment is not a technique, but rather a philosophy. It is a philosophical method

implemented to achieve organizational goal accomplishment, requiring a deliberate and

phased transformation in how organizations are designed and managed (Dimitriades

2001). Creating an environment in which employees are motivated and are able to have

some ownership in their job is not an easy task nor is it a duty that will happen overnight.

Empowering employees is not an overnight proposition. It begins with hiring the right

people and training/developing them into the role of empowered employees (Hayes

2003).

323



Interpersonal relations at work (and away) serve a critical role in the development and

maintenance of trust and positive feelings in an organization. The quality of interpersonal

relationships alone is not enough to produce worker productivity, but it can significantly

contribute to it (Billikopf 2006). Interaction in the workplace can include such issues as

workplace boundaries, co-worker relationships, management empathy, and conflict

resolution. Although management may not be the source of these issues, they must

understand how to identify them and subsequently, professionally address them so that

they do not negatively affect the productivity of employees.

Managers and supervisors can achieve greater trust from their employees by exhibiting

empathetic attitudes. Empathy requires that managers suspend judgment of another’s

actions or reactions, while they try to understand them. Showing empathy means

listening, listening, listening, asking the right questions, and suspending judgment of the

person’s fears or concerns. By understanding employees during the change process, the

manager should be able to reduce resistance, counter lower morale, and generally face

fewer problems (Bacal 2006). Conflict in the workplace will occur. The key for

management, in order to foster greater employee satisfaction, is to recognize the issue

early, listen to the employee or employees involved, and take quick and decisive action to

resolve the issue.

324


Employee Benefits

With the rising costs of healthcare and other employee related benefits, benefits offered

to employees is becoming one of the largest expenses incurred by most organizations.

Research shows that today’s employees will move to another job just for a better benefits

package, even if the pay scale is lower. Benefits can include things like medical, dental,

supplemental insurances, flextime schedules, and retirement benefits. Organizations that

work with their employees to secure better benefits have a more motivated and loyal

workforce than those who don’t. Organizations need to realize that employee benefits are

of high concern to their workforce and a very emotional subject. The management of an

organization should strive to provide the maximum benefits package as feasible to their

employees.

Employee Motivation

Motivated employees are needed in our rapidly changing workplace. Motivated

employees help organizations survive. Motivated employees are more productive. To be

effective, managers need to understand what motivates employees within the context of

the roles they perform. The most complex function a manager must perform is motivating

employees. This is inherently difficult because of the many factors and personalities

involved in the process (Bowen and Radhakrishna 1991). Although there are many

common factors that exist between individual employees, employees are not all

motivated by the same factors.

325


As this paper and other published research has identified, employee motivation is rooted

in the field of psychology. One of the most recognized psychological theories of

motivation can be found in Maslow’s Hierarchy of Needs theory. Maslow’s Hierarchy of

Needs identifies five levels of needs, which are best seen as a hierarchy with the most

basic need emerging first and the most sophisticated need last. People move up the

hierarchy one level at a time. Gratified needs lose their strength and the next level of

needs is activated. As basic or lower-level needs are satisfied, higher level needs become

operative. Therefore, a satisfied need is not a motivator (Allen 1998). The basic human

needs, according to Maslow are: physiological needs (lowest), safety needs, love needs,

esteem needs, and self-actualization needs (highest). This is, therefore, seen as an

ongoing activity, in which the man is totally absorbed in order to attain perfection

through self-development (Accel 2006).

The important conclusion to understand in relation to employee motivation is that it is

vital for management to recognize employee motivators and work toward satisfying those

motivating factors. Employees must be encouraged and willing to let managers know

what motivates them, and managers must be willing to design reward systems that

motivate employees (lindner 1998). In the past, managers assumed incorrectly, that all it

would take to motivate employees is to pay them more. It is conceivable for an

organization to have more employees than a competitor yet produce less and have

disgruntled, low-output employees even though the organization is paying their

employees more than the competitor. The research has clearly shown that increased

motivation and satisfaction can increase worker output. Progressive, innovative managers

326


can now achieve productivity gains with human resource management techniques that go

beyond pay incentives (Increasing Productivity 2005).

Customer Centricity

A truly customer-centric organization is one that defines, markets and sells its products

and services from the customers’ point of view. Many organizations would like to think

they are customer-centric, but few really are. The key to a customer-centric organization

is the ability to accurately assess customer expectations then, meet them. Many

organizations that consider themselves customer-centric are really just customer focused,

which is a big difference. A customer-focused organization outwardly meets customers’

needs and provides great customer service. However, a truly customer-centric

organization is one that creates their strategic business plan around the customer. Rather

than management, employees, or profit driving the direction of the organization, the

customer and their expectations drive the organization in a customer-centric organization.

As is the case with many other deeply rooted theories, becoming customer-centric does

not happen overnight, but it is a philosophy that takes time and patience to implement.


Organizations must continually acquire new customers in order to remain viable, ongoing

business concerns. How they do it and what they spend to do it are the keys to effective

customer acquisition strategies. Companies can acquire customers through costly, but

fast-acting marketing investments, or through slower but cheaper word-of-mouth

processes. The long-term success of the company depends critically on the contribution

327


that each acquired customer makes to overall customer equity (Villanueva et al. 2006).

Organizations should find effective ways to measure acquisition costs and determine the

profitability of an acquired customer by determining the costs associated with customer

acquisition. “Whenever possible, acquisition effectiveness should be measured not by

“soft” metrics of communication effectiveness (e.g., brand awareness) but by “hard”

metrics of profitability” (Greyser and Root 1999).

New customer acquisition is quite often the most expensive part of an organization’s

marketing budget. It is therefore essential that management understand the effectiveness

of these dollars that are spent in order to assess the effectiveness of their acquisition

initiatives. Ad spend covers a wide range of media: TV, radio, newspaper, magazines,

outdoor, direct mail, trade shows, telemarketing, etc. All, with the exception of outdoor

advertising, are capable of cost-per-lead, or cost-per-customer, or cost-per-customer-per-

source accountability. It is a prudent task for managers to examine the marketing

expenditures that are related to new customer acquisition in order to assess the

effectiveness of the money spent on the initiative (Falkson 2004).

For most companies today, the recognition that the brand is indeed the reason they exist

is more the norm than the exception. In fact, more and more companies today are

thinking about their brands in quantifiable terms. For many companies, the brand is seen

as having a measurable value and a direct correlation to the bottom line (Davis and Dunn

2002). Brands today have realizable market value and are quite often the target of

buyouts. Brands are the profit generating entity that companies are willing to buy because

328


of their earnings potential. “Unilever, one of the largest of global conglomerates, in its

efforts to increase profitability, has adopted a strategy of acquiring leading global and

local brands. Most recently it acquired Bestfoods, taking over such well-known brands as

Knorr, Skippy, and Hellman’s. Earlier, Unilever acquired SlimFast and Ben & Jerry’s”

(Gregory 2002). This example highlights the importance of brands to an organization and

their potential profitability as a result of brand awareness.

Marketing can take many forms and be directed at many segments of the consumer

population. Companies should target their customers based on their needs and

expectations rather than just blanket all consumers with the same message. Marketing

investments need to show demonstrable impact on revenue. Concepts such as relationship

marketing are more effective because the messages are more specific to the intended

consumer. Unlike traditional advertising and promotion, the relationship marketing

approach attempts to build lasting relationships by viewing customers for their long-term

income potential to the business, rather than their short-term potential (Commerce 2006).

Organizations that understand this and implement effective target marketing campaigns

realize a greater return on each marketing dollar spent than those organizations that do

not.

World Class Customer Service

Every organization wants to deliver the best customer service possible, but it takes more

than just willing it to happen. There must be employee training, the establishment of

customer service standards, employee empowerment, and a method of measurement and

329


evaluation. A genuine service-oriented attitude is a prerequisite for delivering great

customer service (Selland 2006). Customer service is an essential element in being able

to sustain any business. No matter how wonderful a job an organization does of attracting

new customers, they won’t be profitable long unless they have a solid customer retention

and service strategy in place – and in action. It’s the actions that count – not what is said,

or what the policy may say. Customers will remember what the organization’s employees

have done, or not done to deliver the best service experience possible (Clark 2006).

Organizations that pay attention to the basics of customer service earn their customers’

respect. Customers can usually accept that problems and errors will occur from time to

time in any business relationship. What often matters more to customers than the mistake

itself is how these difficult situations are handled. Customers crave the common

courtesies, which is not to say that the common courtesies can make up for gross

negligence or repeated problems. However, attention to the everyday, common service

standards can go a long way to establish trust and rapport and create customer acceptance

of the organization’s efforts to resolve problems when they arise (Wheelihan 2002).

The first and most important step toward outstanding service is developing a service

strategy. Strategy sets the stage and defines the constraints from all the other steps.

Overlooking strategy and rushing headlong to improve is always a mistake (Klein 1999).

Organizations must then openly share the strategy with their employees and be willing to

train them if it is needed. One of the most important aspects of delivering great customer

service is the ability to monitor the achievement of customer service delivery goals.

330


Many organizations feel that as long as sales are growing, they must be delivering great

customer service. However, it has been shown that this may not be the case at all.

Research has shown that it takes up to six times the investment to acquire a new customer

as to keep an existing customer. Therefore, it makes sense to measure the level of

customer service the organization is delivering (Saxby 2006).

There are many reasons customers quite returning to a place of business. Four percent

move away, five percent change their purchasing habits, nine percent defect to the

competition, and fourteen percent leave because they are unhappy with the service they

receive. However, an overwhelming sixty-eight percent leave because they encounter an

attitude of indifference (Selland 2006). Organizations that go about strategically

improving their customer service delivery and follow-up to ensure that it is working will

realize greater customer retention over time.

Customer Expectations

As technology improves and faster and more efficient methods of customer service

evolve, customer expectations rise. Successful service efforts of the past contribute to

customers’ attitudes, raising their expectations with each new technology, each new

approach. Even as customer expectations continue to rise, surveys find customers and

consumers find broadly based dissatisfaction with the general state of customer service

(Colombo 2006). Managing customer expectations is not a straightforward proposition,

as it can be a daunting task to assess what the customer wants ahead of the customer

service delivery. Managing customer expectations is a tricky business because it is those

331


very expectations that often provide a substantial competitive advantage. Customers often

make choices between two or more suppliers of goods and services based on what they

expect in the way of quality and service (Francese 2002).

A great deal has been written about becoming customer-centric, understanding customer

expectations, and operating with the customer as the focus. Whatever the customer’s

expectations; the challenge is to respond to those expectations in a way that aligns the

organization’s business goals including controlling costs and increasing profitability

(Tambellini and Liu 2005). Many organizations unknowingly create expectations in their

customers because of certain marketing and advertising they have done in regard to a

product or service. For almost every business, a whole set of “hidden” or unconscious

expectations affect the quality of its customers’ experiences. If organizations only focus

on the most explicit of customer expectations, then the customers’ experiences will

almost always be much less satisfying than possible. Although all of the customers’

expectations are important, an organization should be trying to tenaciously understand all

of their customers’ expectations, especially the hidden ones, and then explore ways to

address them (Colombo 2003).

Customer Service Training

Almost every vocation or task requires training and practice in order to master; delivering

great customer service is no different. Teaching employees how to provide customer

service is just good business, as it has been proven to have a direct impact on the bottom

line of an organization. As this paper previously discussed, fully engaged customers

332


deliver a twenty-three percent premium over average customers in share of wallet, added

profitability, added revenue, and relationship growth, according to Gallup research, while

actively disengaged customers represent a thirteen percent discount on the same

measures. Organizations that teach their employees how to effectively provide customer

service and proactively engage customers are the beneficiaries of increases in

profitability, revenue, and relationship growth.

Customer service training is as important as any other training a company may undertake.

Many times it is assumed that employees know how to provide excellent service. In

actuality, some are better than others, but all employees can benefit from customer

service training (Customer 2006). A big mistake that many companies make is training

only a small percentage of their staff, usually those who work directly with the

customers, such as the customer service department. Doing so is ineffective and

dangerous because it promotes the message that customer service is the specific

responsibility of a limited group of people within the organization (Leland and Bailey

2006).

The Employee-Customer Relationship

Researchers have undertaken numerous studies to look at the connection between

customer and employee satisfaction. An overwhelming majority of these studies found a

direct correlation between employee satisfaction, customer satisfaction and profitability

(Greenberg 2006). In study after study, customers cite their interaction with employees as

one of the strongest factors in their continued patronage of a specific organization. The

333


strength of a customer’s relationship with the employee affects repeat business,

recommendations, and probability of paying a premium price for products. Not all

employee-customer relationships are the same, and trust is critical in building those that

endure. Employees are the single biggest factor in reducing customer desertion to

competitors. The quality of the employee-customer relationship positively affects

customers’ assessments of their relationship with the organization (Johnson 2006).

The relationship between employee satisfaction and customer satisfaction has received

further empirical confirmation from two methodologically strong studies. Specifically, a

recent meta-analytic investigation (Harter, Schmidt, and Hayes 2002), based on 7,939

business units in 36 companies, found generalizable relationships, large enough to have

substantial practical value, between employee satisfaction and business-unit outcomes

such as customer service, productivity, profit, and employee turnover. Customer

satisfaction and loyalty invariably are earned by delivering excellent customer service,

and the human touch is often the key differentiator. Additionally, customers with higher

lifetime value have learned to expect more. The empirical literature on this subject

highlights the criticality of the relationship between employee attitudes and customer

satisfaction. “How employees feel about their job has an impact on their work

experience, but also on tangible business outcomes such as customer satisfaction, sales,

and profit. Employees can strongly contribute to an organization’s success by having a

customer-centric approach in their work and in their work-related interactions”

(Bulgarella 2005).

334


Transforming Customer Satisfaction Into Customer Loyalty

Although most organizations strive to provide the best customer service possible in order

to create customer satisfaction, what they really need to do in order to maximize

customer value, is to create customer loyalty. Recent studies provide empirical evidence

of something we already know intuitively: customer loyalty is a key driver of

profitability. Creating customer loyalty must be an integral part of an organization’s

strategy – particularly in a time of industry consolidation (Teegarden and Krok 2006).

The literature is quite clear that satisfied customers are not necessarily loyal customers,

although all loyal customers are satisfied. Organizations that focus on making satisfied

customers into loyal customers can count on spurring business growth and profitability

into the future.

Many companies fail at customer loyalty initiatives because they are consumed with

measuring the wrong metrics. Instead of focusing on true customer loyalty metrics, most

companies instead fixate on measuring customer satisfaction. Satisfaction reflects a

degree of stated happiness with a current choice, but says little or nothing about the

customers’ feelings about other alternatives. Brands that are often rated number one in

customer satisfaction, are not the number one brands in terms of customer loyalty and

repurchase rates (McEwen 2005). Single events or one-time interaction with customers,

although satisfactory, do not provide the lasting effect or potential profitability of an

ongoing, loyal relationship provides to an organization. We are now poised to enter a new

era of loyalty management in which winning companies will move beyond measuring

335


customer satisfaction and defection only to approaches based on a broader understanding

of customer migration and attitudes (Gokey and Coyles 2001).

Measuring Customer Satisfaction

Although the key for every organization should be to create loyal customers, customer

satisfaction still needs to be measured along the way to ensure that customer expectations

are being met. The key is to consistently measure customer satisfaction levels to be

certain that the organization is not susceptible to abandonment by their customer base.

There are several ways to measure customer satisfaction – formally and informally that

include such tools as: person-to-person, quarterly meetings, feedback cards, and customer

satisfaction surveys. A solid understanding of the sentiments and feelings of an

organization’s customer base can prevent customer loss or erosion in customer

satisfaction (Castiglione 2006).

As markets shrink, companies are scrambling to boost customer satisfaction and keep

their current customers rather than devoting additional resources to chase potential new

customers. The claim that it costs five to eight times as much to get new customers than

to hold on to old ones is key to understanding the drive toward benchmarking and

tracking customer satisfaction (Cacioppo 2000). Organizations that succeed at accurately

measuring customer satisfaction take into account the concept of customer value, rather

than focusing on a one-time event to judge satisfaction levels. Any simplistic approach to

customer satisfaction measurement that fails to recognize the concept of value is likely to

fail. It can be useful to ask customers to express their satisfaction – and many

336


organizations do this using simple questionnaires with equally simple scoring systems

(Evans 2002). However, this method provides the results of only a point in time and not

the value of an ongoing relationship or string of contacts with a particular customer.

Customer Relationship Management

Customer relationship management tools allow organizations to cater to the needs and

desires of individual customers, at the same time, across their entire customer base. Many

organizations today don’t know who among their customers are the ones to really focus

on. Customers are not created equal, yet the services provided by many organizations

seem to make exactly this assumption. “Although consistent customer service delivery is

important, providing high quality service to all customers is simply not economically

logical, especially when an organization does not know the individual’s value to the

organization” (Meltzer 2003). Customer relationship management strategies allow

organizations to develop economies of scale in providing the appropriate level of service

and product management to their customers. For a small business servicing less than a

thousand or so customers, it is feasible to build and maintain customer relationships

entirely through face-to-face interactions between staff and the customers. But, as a

business grows in size and number of customers, building and maintaining customer

relationships and managing customer information quickly become complicated tasks

(Ferruzza 1999).

By Definition, CRM (Customer Relationship Management) analytics comprises all

programming that analyzes data about an organization’s customers and presents this data

337


in such a way that better and quicker decisions can be made (Cohen 2005). CRM systems

offer a comprehensive approach to the way customer information is gathered and

disseminated, such as purchasing and service history and buyer preferences, to help the

organization and its employees better anticipate and meet customer needs (McIntyre

2006). CRM is ultimately a business strategy to select and manage customer relationships

in order to optimize long-term value to an enterprise. CRM requires a customer-centric

business philosophy and culture to support effective marketing, sales and service

processes across all direct and indirect customer interaction channels (Business Week

2006).

Although powerful, and in many cases an excellent tool, there are companies that do not

use CRM technologies in the ways intended. CRM is manipulation in too many cases.

Companies are acting on information of customers against their interests – calling them at

home at night, and charging them at the highest price point that the software shows they

will pay (Reichheld in Prewitt 2002). As this paper previously discussed, the most

significant problem can be the perception that CRM is a magic bullet, a panacea for all

customer support problems. This is simply not true (Shah 2007). Gartner Group studies

concluded that up to fifty-one percent of large CRM solutions implemented so far have

failed to perform up to expectations, primarily due to overly complex features and

operation (Inge 2001).

As organizations use customer service to differentiate themselves, customer service

management has gained prominence as a strategic initiative. A key enabler, it allows

338


businesses to use their knowledge assets to provide better customer service (Egain 2004).

Such an information-rich environment enables businesses to foster solid loyalty while

optimizing their own sales and marketing goals. Not incidentally, businesses also can

influence choices and actions at the most pivotal moment: when interactions are under

way (IBM 2006). Customer relationship management, whether formalized or not, is

something all organizations do each time they communicate with their customers and

provide them with products and services. From there on out, it is pretty much a question

of scale which drives companies to more or less automate that process in order to cost-

effectively achieve their objectives and their position in the marketplace (Van de Lanotte

2003).

The Effects of Employee Satisfaction and Customer Retention on Corporate

Profitability

Creating Value Through Satisfied, Loyal & Productive Employees

“What drives the new business model is not profit itself, but the creation of value for the

customer, a process that lies at the core of all successful enterprises” (Reichheld 1996). A

key component in driving this customer value, and ultimately greater earning capacity for

the organization, are the organization’s employees. As his paper and other empirical

research has shown, organizations can realize substantial value in many respects, by

creating and maintaining a satisfied workforce. The employee satisfaction objective

recognizes that employee morale and overall job satisfaction is now considered highly

important by most organizations. Satisfied employees are a precondition for increasing

productivity, responsiveness, quality, and customer service (Kaplan and Norton 1996).

339


Loyal long-term employees learn how to reduce costs and improve quality, which further

enriches the customer value proposition and generates superior productivity. These

surpluses in productivity can be used to fund improved compensation and better tools for

training, which further reinforce employee productivity, compensation growth, and

loyalty (Reichheld 1996).

Employees create value for their organizations through the profitable relationships they

create with the organization’s customers. As the research has shown, loyal customers are

profitable customers and loyal customers have an emotional connection with the

organization, most often because of the employees at the organization. In order for

employee value creation to even be a consideration, the employee must be satisfied with

his or her employment situation. Satisfied and loyal employees deliver better customer

service, make fewer mistakes, and maintain an emotional connection to the organization

for which they work. “A series of service encounters between an employee and a

customer will lead to a productive and profitable relationship only if the employee is able

to achieve consistently high quality in the encounter” (Heskett, Sasser, and Schlessinger

1997).

This paper highlighted many of the components related to creating satisfied, loyal and

productive employees. The bottom line is that in order to enhance the capabilities that

will lead to addressing these components, organizations must be able to view their

employees as valuable assets that are integral parts being able to create value for the

organization. Successful companies position themselves for the future and create

340


strategies to align people, systems, and resources. Leaders good at capitalizing on

customer relationship management and supply chain processes still leave gold in their

backyards by not providing organizational environments in which people thrive and

positively impact the bottom line (Gewirtz 2005).

Customer Loyalty Effects on Corporate Profitability

The research leaves absolutely no doubt that customer loyalty can have a positive impact

on corporate profitability. Customer loyalty relates to probable behaviors. To measure

customer loyalty, an organization must develop specific dimensions of customer loyalty

to determine the description and intensity of customer loyalty in aggregate and within

each core segment of key customer served (Teegarden and Krok 2006). The importance

of creating and maintaining customer loyalty is not new. Most corporate leaders

understand that it costs more to find a new customer than to keep an existing one.

However, despite heavy investments in customer satisfaction efforts, rewards programs,

and CRM initiatives and infrastructure, loyalty remains an elusive goal in almost every

industry (Gokey and Coyles 2001).

This paper has discussed the concept of focusing on profitable customers. The reason this

is important for organizations to understand is that its most profitable customers are more

than likely going to be its most loyal customers as well. “Organizations must be able to

analyze their customer base and ask important questions like: how much is it costing us

to service this customer? How much profit is this customer contributing to the

organization? Who are the customers we should concentrate on for retention? And, what

341


are the characteristics of customers we want to acquire (Maltzer 2003)?” The lifetime

value of a customer can and should be computed and analyzed by the organization.

Estimates of the lifetime value of existing customers under various assumptions

regarding their loyalty helps the organization calibrate expenses to retain customers

(Heskett, Sasser, and Schlessinger 1997). All companies seek more profitable customers,

some spending a great deal of time and money to do so. But few realize that some

customers are inherently more loyal than others (Reichheld 1996).

In order for organizations to maximize the value and subsequent profitability of their

loyal customers, they must find a way to analyze the lifetime profitability of the

customer. The lifetime value analysis is used to test the validity of loyalty building

strategies before serious money is spent on them. In the past, companies have had to bull

ahead and try new ideas without any really good way of measuring the effectiveness.

Lifetime value gives them a valuable tool (Hughes 2006). Far too often, organizations

attempt to target all customers with advertising and marketing efforts, believing that all

customers will lead to added profitability for the organization. This however, is not the

case and will prove to be a very expensive proposition for the company. “Customer

profitability strategies may reveal that certain targeted customers are unprofitable. This is

particularly likely to occur with newly acquired customers, where a considerable

acquisition effort has yet to be offset from the margins earned by selling products and

services to the customers” (Kaplan and Norton 1996).

342


The Service Profit Chain at Maine Savings – Discussion & Analysis

It is clear from the analysis in this paper that Maine Savings has a firm grasp on the

concept of improving its organization through the effective implementation of the service

profit chain strategy. The leadership of the organization has worked collaboratively in

order to ensure every possible aspect of employee satisfaction and customer retention has

been addressed. A very important conclusion is that because the organization regularly

analyzes the progress of the initiative, as well as monitoring achievement to an

established benchmark, they understand where they are in terms of progress, but more

importantly, where they need to go. By all accounts, the employees are more satisfied, the

customers are more satisfied, and consequently, profitability is at its highest point in the

organization’s history. Maine Savings is proof that if addressed properly and

comprehensively, employee satisfaction can have a major and lasting effect on customer

retention, and subsequently on corporate profitability.

Limitations

Although there is a vast and diverse array of materials available on the individual topics

of employee satisfaction or, customer retention or, corporate profitability, very little

literature exists on incorporating the three into one strategy. There is a modest amount of

literature and research that exists on two of the three areas, but still does not address the

interrelationship of the three elements that together, are know as the service profit chain.

Therefore, the majority of the research conducted in this paper was the result of

gathering, analyzing, and combining theories related to the individual topics into one

cohesive and relevant analysis.

343


Chapter 14

Recommendations & Where, When, How, and Why

Employees as Assets

Recommendation: Employees should be considered valuable assets that are integral

parts of an organization’s success and future.

Reasons: The literature and professional input is clear that without satisfied and

supportive employees, an organization cannot realize improvements in operations,

customer service, or any other profit generating initiative. The costs of neglecting

employees as valuable assets and an integral part of an organization’s core strategy

means losing talent and any competitive edge an organization may have.

Points of Caution: It is not enough for an organization to profess that they believe their

employees are invaluable assets, they must take actions to solidify this belief. Just as they

would with valuable machinery, an organization should invest in the maintenance and

upgrade of their employees as well.

Addressing Employee Satisfaction Comprehensively

Recommendation: All of the elements involved in employee satisfaction should be

analyzed and addressed in order to maximize the potential success and results of the

analysis.

344


Reasons: It is essential for organizations to comprehensively analyze all of the potential

elements that may have an effect on employee satisfaction. Every element is important

and some elements may affect some employees more than others. Only when all of the

factors involved in employee satisfaction have been analyzed, can an organization

implement an effective strategy designed to address them.

Points of Caution: Many organizations set out to improve employee satisfaction, only to

begin by targeting what are thought to be the “major” problems or issues. In fact, all

elements should be analyzed, whether or not an issue is believed to exist. No element is

more important than any other element, even though it may have a greater effect on

employee satisfaction.

Organizational Leadership

Recommendation: The leadership of the organization must be supportive of any service

profit chain initiative, and publicly acknowledge support for the endeavor.

Reasons: Without visible support from the leadership of the organization, any employee-

involved initiative will struggle to be successful. The leadership should outline the goals

to be attained, as well as the strategies that will be used to attain the goals to the

employees. At the same time, they should openly and outwardly show support for the

initiative and talk in a positive manner so that employees know that the initiative has the

full backing of the senior management team.

345


Points of Caution: Far too often organizations begin an initiative in strong fashion only

to have support from the senior leadership wane. In business there are many priorities.

However, a major undertaking such as the implementation of a service profit chain

strategy requires ongoing and constant attention from management. If the employee base

sees a lower priority being put on the initiative from management, they too will develop a

lower priority for the strategy.

Employee Involvement

Recommendation: Employees of the organization should be involved in the elements

related to their own satisfaction.

Reasons: Employee owned change is practical and functions as a discipline to focus

energy on specific tangible goals. The wants and needs of the individual are essential

input to the overall goal-setting process of the group (Carter-Scott 2006). Employees that

are empowered to provide input into their own satisfaction strategies will take ownership

of the new process and work to make it successful.

Point of Caution: The leadership of an organization really needs to allow their

employees to have meaningful input into a service profit chain strategy implementation.

Making it only look as if the employees will have superficial input will cause them to

become disinterested in the strategy, or rebel against the results.

346


Service profit Chain Initiatives Should be Adequately Funded

Recommendation: Organizations should ensure that expenses related to the

implementation of a service profit strategy are budgeted for and that adequate funding is

provided in order to ensure the success of the strategy.

Reasons: Initiatives that are not budgeted for or funded are typically very short lived.

Organizations should ensure that an appropriate budget exists for the implementation of a

comprehensive service profit strategy and that the funding for the initiative is available

when needed.

Points of Caution: With the speed and uncertainty of business today, it is very easy to

divert funds and cut funding for complex and comprehensive initiatives like the service

profit strategy initiative. Once an organization creates a budget for the implementation of

the strategy and sets aside funding, it is imperative that the funding necessary remains

available to finance the strategy. Once available funds disappear, it is extremely difficult

to keep the strategy going as planned.

Employee Feedback

Recommendation: Organizations should constantly assess employee attitudes through

the encouragement of proactive feedback and the guarantee of no retribution.

Reasons: All employees should have frequent opportunities to receive and give feedback

to the management of the company in regard to the progress of their work on a service

347


profit chain initiative. This allows employees to have an empowering voice that they

know will be heard, but also allows management to assess the attitudes and input of the

workforce.

Points of Caution: Feedback is important to both the employee and management of an

organization. Employees must know that their feedback will be listened to and considered

without the fear of retribution. Organizations that selectively punish employee feedback

or do not respond in any way, quickly stifle the process and create discontent among

workers.

Customer Centricity

Recommendation: Organizations that are contemplating instituting a service profit chain

strategy should first become a truly customer-centric organization.

Reasons: Successful organizations must go beyond meeting customer expectations and

work to exceed them. This requires a new type of business strategy where the customer is

the center of the strategy. This is known as customer-centricity. Metrics arise from the

customer service strategy as reference points to keep the entire organization focused, to

measure progress against business goals, which are now all focused on the customer and

the most efficient delivery of products and services to them.

Points of Caution: Organizations need to avoid just saying they are customer-centric

without actually changing their strategy and focus to become customer centric. Literally

348


all business processes must be retooled to work on behalf of or in the best interests of the

customers. Organizations that just pay lip service to being customer-centric will not have

the level of success as those organizations that actually adopt it as a working strategy.

“Best in Class” Customer Service Delivery

Recommendation: Organizations should analyze and implement “best in class”

customer service strategies.

Reasons: Many products and services have become nothing more than commodities and

what sets apart one company from another is the level of service used to deliver these

products and services. Many companies such as Disney, Ritz-Carlton, and Pikes Place

Fish Market have found the formula for delivering great customer service that is proven

to satisfy customers. Organizations should study companies like these to assess what they

are doing right and then adopt some of these successful strategies.

Points of Caution: Although there are companies that are known for their exceptional

delivery of customer service, every organization must customize or tailor their service

delivery to their own customers and situation. There is no exact template for “best in

class” service delivery that can be used in every organization in exactly the same way.

Customer Identification

Recommendation: Organizations should identify their most profitable customers.

349


Reasons: Many companies market and advertise the same way to all of their customers.

There are customers that are more profitable to organizations than others. In order to take

advantage of this and to maximize the profit potential of these customers, they should be

identified and marketed to on a target basis.

Points of Caution: Organizations should not operate on assumptions as to who they

think their most profitable customers are. Customers that use the most services or buy the

most products may not be the most profitable. Organizations should develop an accurate

tool to analyze the profitability of their customer base or risk wasting time, effort, and

money on a shotgun approach to economic growth.

Assessing Customer Expectations

Recommendation: In order to build customer retention and loyalty, organizations should

take the steps necessary to accurately assess customer expectations on an ongoing basis.

Reasons: Customer expectations are always rising, as well as changing. In order for

companies to effectively compete and gain a market edge, they need to be constantly

evaluating and analyzing customer expectations. An organization must understand its

customers’ hidden expectations as well as their most explicit expectations.

Points of Caution: Many times, organizations assume they understand their customers’

expectations and address only the explicit or current expectations. In many cases,

customers may be satisfied with a transaction, but are looking for something else.

350


Effective organizations look to the future and anticipate their customers’ expectations. An

organization should never assume that they are fully aware of what their customers want.

Customer Relationship Management

Recommendation: Organizations should invest in comprehensive customer relationship

management strategies.

Reasons: CRM systems offer a comprehensive approach to the way customer

information is gathered and disseminated, such as purchasing and service history and

buyer preferences, to help the organization and its employees better anticipate and meet

customer needs (McIntyre 2006).

Points of Caution: The most significant problem is the perception that CRM is a magic

bullet, a panacea for all customer support problems, which is not true (Shah 2007). CRM

is a business process and must be an integral part of the organization’s business strategy

in order to be effective. Customer loyalty is not automatically created with the

implementation of a new, dynamic software package. The software must be used in

conjunction with a philosophy and business strategy.

The Service Profit Chain

Recommendation: Constantly analyze the service profit chain at the organization in

order to maintain an accurate understanding of the interrelationship of all of the elements

involved.

351


Reasons: The three main components of the service profit chain: employee satisfaction,

customer retention (satisfaction), and corporate profitability, are all evolving and rapidly

changing elements. An organization should constantly analyze and understand the

evolution of change associated with each in order to be able to respond in an expedient

and efficient manner.

Points of Caution: Because the three main elements of the service profit chain can

change rapidly, and because they all have an effect on one another, an organization must

ensure constant analysis of the components involved. Changes that are only made to one

of the elements will have an effect on other elements as well. Organizations should be

cognizant of the entire strategy and be hesitant to make changes to an element without

first understanding the ramifications for the other two elements.

Integrating the Service Profit Strategy

Recommendation: Organizations should make the service profit strategy part of the

business plan.

Reasons: The service profit chain strategy is a method of doing business, not a

theoretical “pick and choose” business practice. Successful organizations incorporate the

strategy into the fabric of the organization’s culture. The strategy becomes the roadmap

for the strategic direction of the organization and must be followed with discipline and

commitment in order to ensure success.

352


Points of Caution: If not incorporated into the business plan of an organization, a

leadership gap will most likely result. “A leadership gap is the failure to incorporate

service profit chain thinking into the core beliefs and culture of the organization, a

tendency to confuse the organization with too many messages and too little focus, and an

inability to lead by word and example” (Heskett et al. 1997).

Tools for Measuring Value

Recommendation: Organizations should identify the value propositions to be created by

implementing the service profit chain strategy and establish benchmarks for measuring

progress toward the goals.

Reasons: No initiative can be graded unless goals are set for attainment and benchmarks

are established to mark progress. Organizations should have attainable goals and periodic

benchmarks established in order to ascertain their level of progress toward the end goal.

If the strategy is not measured, it cannot be assessed for success.

Points of Caution: The benchmarks need to be verifiable and based on solid data. The

goals for the strategy need to be realistic and attainable. Every functional area within the

organization needs to be involved with the goal setting for their departments, rather than

have goals dictated to them by management.

353


Where, When, and How

The questions of where, when, and how are the easier questions to answer. The hardest

question would be why? Why aren’t more organizations focusing on the relationship

between employee satisfaction, customer retention (satisfaction), and corporate

profitability? It is clear from the successes at companies such as Wal-Mart, Nordstrom,

Marriott, and Southwest Airlines, that if the strategy is implemented correctly it can have

phenomenally positive effects. One could conclude that many organizations are just too

complex and bureaucratic, or so unfocused or disorganized that they are unable to

implement the strategy. However, comprehensive analysis of the tenets involved, coupled

with the potential results, indicate promising results for the organizations that do

undertake and successfully implement the service profit chain strategy.

Where: The literature, as well as the input from the interviewees, indicate that the service

profit chain strategy can be implemented effectively in any size organization. Almost all

organizations have employees, have customers, and are in the business of generating as

much profit or income as possible. Therefore, the answer to “where” is anywhere.

Although the literature discusses the successes of larger, better-known companies such as

Wal-Mart, the strategy is really applicable to any size organization with employees,

customers, and a profit motive.

When: The question of when is easily answered in this case. The proven results

stemming from improving employee satisfaction, customer retention, and corporate

354


profitability are too valuable to wait to implement. Organizations that have a desire to

improve all three elements of the service profit chain strategy should begin to research

and plan for the implementation of the strategy as soon as possible. Because there are

many various components associated with each element of the strategy, organizations

should take the appropriate time necessary to plan for and address each component.

According to the literature, as well as several of the interviewees, after organizations do

implement the strategy, they ask: why did we wait?

How: Because of the comprehensive nature of the service profit chain strategy and the

fact that it requires a cultural and strategic change, organizations would be well advised

to invest adequate time and energy in planning and training for the initiative. Therefore,

organizations should first invest in training the leadership and functional area managers

on the concept, goals, and methodology involved with all of the elements involved. After

the appropriate personnel have been adequately trained, documented planning, to include

goals, processes, and timelines, should be accomplished. In conjunction with the Board of

Directors, the senior management team should also adopt the strategy as part of the

organization’s strategic business plan and ensure that appropriate funding and budgeting

exist in order to ensure the success of the initiative. Especially at the beginning, but

continually as well, management needs to reinforce the culture change to all of the

employees by publicly supporting and encouraging the endeavor.

References

Accel Team. (2006). “Employee Motivation: Theory and Practice.” Accel Team

355


Consulting. Accessed December 11, 2006. From www.accel-

team.com/motivation/theory_01.html

Acme. (2006). “Anonymous.” Acme Online Survey Analysis and Design. Quintas

Design Case Study. Accessed December 22, 2006. From

www.quintasdesign.com

Adams, C. (2006). “Employee empowerment.” Adams Six Sigma. Adams Associates.

Accessed December 10, 2006. From www.adamssixsigma.com/Newsletters.htm

Agnvall, Elizabeth. (2006). “Just-in-Time Training.” HR Magazine, May . Vol. 51, No. 5.

pp. 67-7

Allen, Gemmy. (1998). “theories of Motivation.” Modern Management.

Amazon.com. (2006). “2005 Annual Report.” Accessed on January 10, 2007. From

www.amazon.com

Arens, Edward A. (2002). “Center for the Built Environment: Fact Sheet.” University

of California at Berkeley. Accessed on November 22, 2006. From

http://www.nsf.gov/pubs/2002/nsf01168/nsf01168t.htm

Ascigil, Semra. (2003). “Teamwork: A Tool for Enhancing Positive Work Attitudes?”

Western Kentucky University, Dissertation.

Associated Press. (2005). “Amazon Knows Who You Are.” Anonymous. Associated

Press, March 27, 2005.

Azani, Cyrus. (2005). “A Methodology For Developing Viable And Cost Effective

Customer Relationship Management Systems.” NGC Information and Technical

Solutions Division, Reza Khorramshahgol, Kogod School of Business.

356

http://www.nsf.gov/pubs/2002/nsf01168/nsf01168t.htm

http://ww.accel-t/

http://ww.accel-t/


Bacal, Robert. (2006). “Empathy – Key to Change Management #1.” Bacal &

Associates, White Paper.

BAI. (2005). “Targeting Bank Improvement Through Employee Data.” BAI

Perspectives, June 2005. Accessed on December 30, 2006. From

www.bai.org/research

BARCO. (1990). “Annual Report.”

Bergquist, Jim. (2005). “Biography.” Keynote Speaker Introduction.” Accessed on

December 30, 2006. From www.keynotespeakers.com/speaker_detail.asp

Berner, Robert and Diane Brady. (2005). “Get Creative.” Business Week, June 2005, pp.

12-13.

Billikopf, Gregorio. (2006). “Interacting With Employees.” Workplace Interpersonal

Relations, University of California, Berkely.

Blake, R.R. and J.S. Mouton. (1968). Corporate Excellence Through Grid Organization

Development. Houston: Gulf Publishing Co., 1968.

Blanchard, Ken and Sheldon Bowles. (1993). Raving Fans. New York: Blanchard

Family Partnership, 1993.

Blanchard, Ken, Carlos, John, and Alan andolph. (1996). Empowerment Takes More

Than a Minute. San Francisco: Berret-Koehler Publishers, Inc., 1996.

Bond, James, Galinsky, Ellen and E. Jeffrey Hill. (2002). “When Work Works.” Families

And Work Institute, National survey and study.

Borland, Jack. (2006). “Employee and Customer Loyalty – Critical Keys to Profitability.”

Vox Incorporated, Research Paper.

Boshoff, C. and G. Mels. (1995). “A casual model to evaluate the relationship among

357

http://www.keynotespeakers.com/speaker_detail.asp

http://www.bai.org/research


Supervision, role stress, organizational commitment and internal service quality.

European Journal of Marketing, 29, 23-42.

Bowen, Cathy F. and Rama Radhakrishma. (1991). “Job Satisfaction and Commitment.”

Journal of Extension. Reprint (June 1994), Vol. 32, No. 1

Bradley, Michelle and Mike Russiello. (2000). “Managing Knowledge in the 21st

Century.” Brain Bench, White Paper.

Brintnall, Jim. (2005). “What Makes a Good Reward.” Recognition News, Vol. 2, Issue

2, 2005.

Brooke, Stephanie L. PhD. (2005). “The Relationship of Consideration and Structure

Leadership Styles to Employee Job Satisfaction in Non Profit Child Care

Organizations.” Dissertation.

Brown, J.D. (1973). “The Human Nature of Organizations.” American Management

Association, New York.

Bulgarella, Caterina C., Ph.D. (2005). “Employee Satisfaction & Customer Satisfaction:

Is There a Relationship?” Guidestar Research, White Paper, February 2005.

Burke, Mary Elizabeth and Jessica Collison. (2004). “Employee Trust and Organizational

Loyalty.” The Society for Human Resource Management and CareerJournal.com,

August 2004. Accessed November 22, 2006. From www.careerjournal.com.

Business Week Online. (2006). “Top 20 Innovative Companies in the World.” Retrieved

23 June 2006, From http://www.businessweek.com/magazine/content/.htm

Business Week. (2006). “Customer Relationship Management.” Business Week Online.

Accessed on January 9, 2007. From www.businessweek.com

Business WeekA. (2006). “The Evolution of Relationship Management.” Business

358

http://www.businessweek.com/

http://www.businessweek.com/magazine/content/.htm

http://www.careerjournal.com/


Week Magazine.

Butcher, David R. (2006). “Employee Empowerment: Eliminate ‘Us Versus Them’.”

Industrial Market Trends. Accessed on December 10, 2006.

From http://news.thomasnet.com/IMT/archives/2006/10.htm.

Cacioppo, Kevin. (2000). “Measuring and Managing Customer Satisfaction.” Quality

Digest, September 2000 Ed.

Calaminus, D., Klopfer, E., Kundisch, D. and P. Wolfersberger. (2001). “Content Model

And Management for Financial Services.” Proceedings of the thirty-fourth annual

Hawaii International Conference on System Sciences (2001).

Cardani, Leann. (2000). “Corporate Mission Statements: A Strategic Management Issue.”

White Paper for St. Francis University. Accessed on December 1, 2006. From

www.stfrancis.edu/ba/ghkickul/stuwebs/btopics/works/mission.htm

Carolina Entrepreneurship Club. (2004). “Employee Training and Development.”

White Paper.

Carter-Scott, Cherie. (2006). “Employee Owned Change.” Consultant White Paper.

Accessed December 2, 2006. From www.negaholics.com/corporate.html

Cascio, Wayne F. (1998). Managing Human Resources. New York: McGraw Hill

Castiglione, Dennis J. (2006). “Measuring Customer Satisfaction.” PROCOM

Management Consultants, White Paper, 2006.

Catapult Systems. “Anonymous.” The Key to Great Customer Service. Catapult Systems

Consulting. Accessed on December 3, 2006. From www.catapultsystems.com

Chaffey, Dave. (2002). E-Business and E-Commerce Management. Essex: Pearson, 2002.

Champy, James. Reengineering Management, the Mandate for New leadership. New

359

http://www.catapultsystems.com/

http://www.negaholics.com/corporate.html

http://news.thomasnet.com/IMT/archives/2006/10.htm


York: Harper Collins Publishers, 1995.

Chapter 11. (2006). “Anonymous.” Employee Development & Training. University of

California, San Francisco.

Chen, P.Y. and P.E. Spector. (1991). “Negatively affectivity as the underlying cause of

Correlations between stressors and strains. Journal of Applied Psychology, 76,

pp. 398-407.

Claritas Consulting. (2006). “Anonymous.” Customer Acquisition & Customer

Retention, White Paper.

Clark, Jane-Michele. (2006). “Delivering Great Customer Service – 10 Tips.” The Q

Group Consulting, White Paper.

Clark, Mary. (2006). “Achieving Adaptability Through Employee Empowerment.”

Winning Workplaces, Feature article. 2006.

Clark, Ruth and Ann Kwinn. (2005). “Aligning Training to Business Results.” Training +

Development, June 2005 ed. Pp. 34-39.

Cleveland, Brad. (2003). “Customer Expectations – Understanding What Your

Customers Want.” Incoming Calls Management Institute, White Paper.

Coca-Cola Company. (2005). “2005 Annual Report.” Accessed on June 7, 2006. From

www.cocacola.com

Cohen, Ethan L. (2005). “Will the Real Value-Added Providers in Customer Relationship

Management Please Stand Up?” Information Week, Gartner Group.

Colombo, George. (2003). “Setting and Managing Your Customers’ Expectations.”

Destination Consulting, White Paper.

Colombo, George. (2006). “Rising Expectations, technology, and retention are among

360

http://www.cocacola.com/


The challenges for 2006.” Customer Service Newsletter, January 2006.

Columbusn, Louis. (2005). “Measuring Customer Satisfaction Like You Mean It.”

American Quality Magazine, Article. Accessed on January 8, 2007. From

www.americanquality.com/artman/publish/printer_637.shtml

Commerce Corporation. (2006). “Anonymous.” Marketing Systems – CRM. Commerce

Corporation Sales Flyer. Accessed on January 8, 2006. From

www.businessmanagement.com/crm.htm

Communication Strategies. (2006). “Anonymous.” The Workplace Council. Accessed

On December 7, 2006. From www.workplacecouncil.com/communication.htm

Communication in the Workplace. (2006). “Anonymous.” Workplace Council, White

Paper, 2006. Accessed on December 7, 2006. From

www.workplacecouncil.com/communication.htm

Connellan, Thomas K. and Ron Zemke. (1993). Sustaining Knock Your Socks Off

Service. New York: American Management Association, 1993.

Cooke, R.A., and D.M. Rousseau. (1988). “Behavioral Norms and Expectations: A

Quantitave Approach to the Assessment of Organizational Culture.” Group &

Organizational Studies, 13 (3), pp. 245-273.

Cowgill, David. (2006). “Five Steps To A Successful CRM Implementation.” CRM

News, Feature article, March 22, 2006.

CUSO Mortgage Corporation. (2006). “Annual Report.”

Dandrade, Robert and David R. Jones. (1995). “Quality/ Customer Satisfaction

Scorecard.” Digital Equipment Corporation White Paper, January 1995.

Daniel, Teresa A. and Dr. Gary S. Metcalf. (2005). “The Science of Motivation.” SHRM

361

http://www.workplacecouncil.com/communication.htm


White Paper.

Dardenne, Marc. (2005). “The True secrets of Legendary Service by the Ritz-Carlton

Hotel Company.” The Ritz-Carlton, Bahrain Hotel & Spa. Accessed on January

2, 2007. From www.fbcdubai.com

Davis, Jeffrey. (2006). “The importance and value of organizational goal setting.”

Flexstudy Course: Managing and Achieving Organizational Goals.

Davis, Larry. (2005). “Service Excellence The Ritz-Carlton Way.” Customer Service

Loyalty Blog. Accessed on December 30, 2006. From

www.loyalty-cdci.com

Davis, Scott M. and Michael Dunn. (2002). Building the Brand Driven Business. San

Francisco: Jossey-Bass, 2002.

De Greene, K.B. (1982). The Adaptive Organization: Anticipation and Management

Of Crisis. New York: John Wiley & Sons.

Deming, W. Edwards. (1986). Out of Crisis. Cambridge: Massachusetts Institute of

Technology, 1986.

Denton, Keith. (2004). “Entrepreneurial Spirit – Employee Empoerment.” Feature

Article. Gale Group, 2004.

Dholakia, Nikhilesh and Anil Pandya. (2001). “Conceptualizing B2C Businesses as

Services.” University of Rhide Island, Kingston. White Paper.

Dimitriades, Zoe. (2001). “Empowerment in Total Quality: Designing an Implementing

Effective Employee Decision-Making Strategies.” University of Piraeus,

Dissertation, 2001.

Duncan-Poitier, Johanna. (2001). “Horizon Issue: Rising Customer Expectations.”

362


State Education Department, The University of the State of New York, Albany.

Dyke, N. (2001). “Will You Still Love Me Tomorrow? E-business is no longer a one-

Night stand, but a long-term relationship.” DestinationCRM.com, May 2001.

Accessed on January 7, 2007. From www.destinationcrm.com

Earle, V. (1996). “Motivational Leadership.” Executive Excellence, November ed. 13,

pp. 16-17.

EGain. (2004). “Anonymous.” Knowledge Management for Customer Service:

Ingredients for Success. EGain Software Company, White Paper

Erickson, David S. and Michele McGlaughlin. (2002). “Customer Relationship

Management.” Information Systems and Control Foundation, White Paper.

Erickson, Tamara J. and Lynda Gratton. (2007). “What it Means to Work Here.”

Harvard Business Review, March 2007, pp. 104-112.

Erven, Bernard L. and Robert A. Milligan. (2001). “Making Employee Motivation a

Partnership.” Ohio State University & Cornell University Cooperative

Extensions, White Paper.

Evans, George. (2002). “Measuring and Managing Customer Value.” Emerald Insights

Research Paper. Volume 51, No. 3. pp. 134-139.

Evenson, Renee. (2000). Customer Service 101: Basic Lessons To Be Your Best.

Whitehouse Station: Bulls Eye Press, 2000.

Falkson, Michael. (2004). “New Customer Acquisition. Campaign Marketing Myopia.”

CRM Project Management, Vol. 5, October 6, 2004.

Ferruzza, Gene M. (1999). “Enterprise-Wide Customer Relationship Management.”

DMReview, May 1999 Ed.

363

http://www.destinationcrm.com/


Findley, Henry and Gordon Amsler. (2006). “How to Establish Clear Employee

Expectations.” CareerJournal.com. The Wall Street Journal. Accessed December

3, 2006. From www.careerjournal.com

Fine, Rebecca. (2000). “Flinging Fish for Fun and Profit.” Coaching for Success, White

Paper.

Flaherty, Jane (1997). “Ten Tips to Cultivate Communication.” Innovative Leader,

Vol. 6, No. 12, December 1997.

Fox, John. (1998). “Employee Empowerment: An Apprenticeship Model.” Barney

School of Business, University of Hartford. Dissertation.

Francese, Peter. (2002). “Managing customer expectations is tricky.” P-R Columnists,

Plattsburgh Marketing Advisor, November 10, 2002 Column.

Frazee, Bonni. (2004). “Organizational Behavior and the Learning Process.” Innovative

Learning, Feature Article, November 2004.

Freiberg, Kevin and Jackie Freiberg. (2005). Guts!: Companies That Blow the Doors

Off Business-As-Usual. New York: Doubleday, 2005.

Fuimano, Julie. (2006). “Creating Environments that Nurture Success.” Life Tools for

Women. Accessed on November 30, 2006. From www.lifetoolsforwomen.com

Full Service. (2006). “Anonymous.” Customer Satisfaction. B2B International. Accessed

January 3, 2007. From www.b2binternational.com

Gafner, Sabey. (1996). ‘Boundaries in the Workplace.” Health Care Supervisor, 15(1),

36-40.

Gallup Organization. (2006). Anonymous. “Leveraging Awards and Recognition

Programs.” Accessed on December 3, 2006. From www.goalkeeperinc.com

364

http://www.goalkeeperinc.com/

http://www.lifetoolsforwomen.com/

http://www.careerjournal.com/


Garavan, Thomas N., Noreen Heraty, and Michael Morley. (1998). Actors in the HRD

Process: An Exploratory Study.” International Studies of Management &

Organization, March 22, 1998.

Gartner, Kimberly. (2005). “A Truly Integrated Marketing Campaign That Yields More

Sales.” Point Clear Marketing, Integrated Marketing Research Paper.

Gartner, W.B. (1988). “Who is an entrepreneur? Is the wrong question.” American

Journal of Small Business, 12(4): 11-32.

Gee, Jeff and Val Gee. (1999). Super Service. New York: McGraw-Hill, 1999.

Gewirtz, Mindy Ph.D. (2005). “People Power: Strategies for creating work environments

To reduce stress and other risks.” Thinking Aloud, February 7, 2005 Ed.

Gitomer, Jeffrey. (1998). Customer Satisfaction is Worthless: Customer Loyalty is

Priceless. Austin: Bard Press, 1998.

Gokey, Tim and Stephanie Coyles. (2001). “The New Era of Customer Loyalty

Management.” McKinsey & Company, Marketing Practices White Paper.

Gomolski, Barbara. (2005). “Are You Reaaly Customer-Centric?” Computerworld,

February 21, 2005.

Gray, Joh. (2006). “Motivating Employees.” John Gray Awards. Accessed November 20,

2006. From www.johngray.com/Employee_Motivation.aspx.

Greenberg, Penelope Sue and Ralph H. Greenberg. (2006). “Who needs budgets?”

Strategic Finance, August, 2006, pp. 41-42.

Greenberg, Josh. (2006). “Examining the Relationship Between Employee Satisfaction

And Customer Satisfaction.” AlphaMeasure Employee Survey Systems, White

Paper.

365

http://www.johngray.com/Employee_Motivation.aspx


Gregory, James R. and Jack G. Wiechmann. (2002). Branding Across Borders. New

York: McGraw-Hill, 2002.

Greyser, Stephen A. and H. Paul Root. (1999). “Improving Advertising Budgeting.”

MSI Working Paper, Report No. 00-126.

Gryskiewicz, Stanley S. (1999). Positive Turbulence: Developing Climates for

Creativity, Innovation, and Renewal. San Francisco: Jossey-Bass Inc., 1999.

GuideStar Research. (2006). “Employee Attitude Surveys.” GuideStar Research

Consultants. Accessed on November 25, 2006. From

www.employeeattitude-surveys.com/index.html

Hackman, J.R. and G.R. Oldham. (1980). Work redesign. Reading: Addison-Wesley.

Haghirian, Parissa Ph.D. (2006). “Knowledge Management: What CanYou Learn From

Japan?” ISM Tokyo Session, Slide Presentation. October 4, 2006.

Haley, Paul. (2005). “Knowledge Management and Knowledge Automation Systems.”

Gallagher Financial Systems, White Paper, 2005.

Hall, Jay. (1980). “Interpersonal Style and Corporate Climate: Communication

Revisited”, in J.A. Shotgren (ed.), Models for Management: The Structure of

Competence (Teleometrics International, Woodlands, TX), pp. 216-236.

Hamel, Gary and C.K. Prahalad. (1994). Competing for the Future. Boston: Harvard

Business School Press, 1994.

Hammer, Michael and James Champy. Reengineering the Corporation, A Manifesto

For Business Revolution. New York: HarperCollins Publishers, 1993.

Hanan, Mack. (1987). Successful Market Penetration. New York: AMACOM, 1987.

Harshman, Ellen F. and Carl L. Harshman. (1999). “Communicating With Employees:

366

http://www.employeeattitude-surveys.com/index.html


Building on an Ethical Foundation.” Journal of Business Ethics, 19: 3-19, 1999.

Harter, James K. and Frank L. Schmidt. (2002). “Well-Being in the Workplace and

Its Relation to Business Outcomes.” Gallup Poll Results.

Hayes, Jason. (2003). “Employee Empowerment: Commerce Bank and Cast-Fab

Technologies. Emporia State University School of Business, Dissertation.

Hayes, Jenny. (1998). Managing Customer Service. Brookfield: Gower.

Healey, Carolyn. (2006). “Employee Empowerment: Moving Beyond Words Into

Action.” Supportindustry.com. Accessed on December 2, 2006. From

www.supportindustry.com/newsletter/empowerment.htm

Heerwagen, Judith H. (2004). “Collaborative Knowledge Work Environments.” Building

Research & Information, Nov.-Dec. 2004, 32(6), pp. 510-528.

Herz, Jonathan. (2005). “GSA Sustainable Workplace.” General Services Administration,

Office of Government Policy, Presentation.

Heskett, James L., Sasser, Earl W. and Leonard Schlesinger. (1997). The Service Profit

Chain. New York: The Free Press, 1997.

Hildula, Leslie. (1996). “Improving Employee Empowerment.” The CPA Journal, Jan.

1996 Ed,.

Hitt, Justin. (2003). “Building Business Relationships.” Consulting White Paper.

Accessed on December 28, 2006. From www.iunctura.com

Hollon, John. (2005). Behind the Wal-Mart Memo.” Workforce Management, November

7, 2005, p. 58.

Holtz, Shel. (2006). “Communicating With Employees.” Holtz Communication +

Technology, White Paper.

367


Horn, Peter Ph.D. (2005). “e-Commerce – Legal, Business and Tax Issues.” International

School of Management, Syllabus.

Huff, Charlotte. (2005). “Consumer Revolution.” Workforce Management, September,

2005, pp. 57-60.

Hughes, Arthur. (2006). “Customer Retention: Integrating Lifetime Value into Marketing

Strategie.” Database Marketing Institute article. December 28, 2006. Accessed

December 28, 2006. From www.dbmarketing.com

Human Resource Focus. (2006). “Anonymous.” Army Training Course. Accessed on

December 15, 2006. From www.hqda.army.mil/leadingchange.htm

Huq, Z., and J. Stole. (1998). “Total Quality Management Contrasts in Manufacturing

And Service Industries.” International Journal of Quality and Reliability

Management 12, no. 9: 210-220.

Ince, Darrel. (2002). Developing Distributed and E-commerce Applications. Essex:

Pearson Education Limited, 2002.

Increasing Productivity. (2005). “Anonymous.” Employee Network Monitoring.

Accessed on December 11, 2006. From

www.employee-network-monitoring.com

Inge, Jon. (2001). “Customer Relationship Management.” Hospitality Upgrade

Magazine, Fall 2001 Ed.

International Business Machines. (2006). “Anonymous.” International Business

Machines, White Paper, July 2006.

International School of Management. (2006). “Anonymous.” Opportunities for Doing

Business on the Web. E-Commerce: Business, Law & Taxation course materials.

368

http://www.employee-network-monitoring.com/

http://www.hqda.army.mil/leadingchange.htm


Jewell, Bob. (2006). “Setting Organizational Strategy, Goals, and Objectives.” Omega

Leadership Group, 2006.

Johnson, William C. and Larry G. Chiagouris. (2006). “So Happy Together.” Marketing

Management. March/April 2006, pp. 47-49.

Jones, Thomas O. (1994). “The Service Profit Chain.” Harvard Business Review, March

2004.

Kaplan, Robert S. and David P. Norton. (1996). The Balanced Scorecard. Boston:

Harvard Business School Press.

Kaplan, Robert S. and David P. Norton. (2001). The Strategy Focused Organization.

Boston: Harvard Business School Press.

Kemp-Longmore, Christine. (2000). “Conflict Resolution in the Workplace.” Black

Collegian. Accessed December 4, 2006. From www.black-collegian.com

Kindinger, Paul. (2005). “Customer Loyalty: How to Measure it and How to Keep it.”

NAEDA Equipment Dealer, March 2005 Ed.

Kirby, Bill. (2002). “Interpersonal Relations at Work.” UWSP Course Materials.

Accessed on December15, 2006. From www.uwsp.edu/education.htm

Kirkpatrick, Jim. (2005). “Transferring Learning to Behavior.” Training + Development,

April, 2005 ed., pp. 18-21.

Klein, A.S., Masi, R.J. and C.K. Weidner. (1995). “Organizational Culture, Distribution

And Amount of Control, and Perceptions of Quality: An Empirical Study of

Linkages.” Group & Organization Management, 20 (2), pp. 122-148.

Klein, Hal. (1999). “Customer Service Strategies.” Computer Associates, White Paper.

Krishnamurthy, Sandeep. (2002). “Amazon.com – A Business History.” E-Commerce

369

http://www.uwsp.edu/education.htm

http://www.black-collegian.com/


Management: Text and Cases, Case #1.

Laff, Michael. “What is Effective Training. (2006). ” Training + Development, June ed.

pp. 12-13.

Lakhankar, Jitendra. (2006). “Implementing Effective email Response management

System.” CRM Technical Architecture, White Paper.

Lampton, bill. (2003). “Paragon of Customer Service Excellence – The Ritz-Carlton

Hotel PART I.” Expert Magazine, December 1, 2003.

Lancourt, Joan and Charles Savage. (1995). “Organizational Transformation and the

Changing Role of the Human Resource Function.” Compensation & Benefits

Management, Vol. 11, Nr. 4, Autumn 1995.

Laudon, Kenneth C. and Carol Guercio Traver. (2003). E-commerce: business.

Technology. Society. Boston: Addison Wesley, 2003.

Leadership Development. (2006). “Anonymous.” Leadership Development Series

Module 2 – Managing Relationships. Accessed on December 15, 2006. From

http://www.iwmf.org/training/t_module2/page3.php

Leland, Karen and Keith Bailey. (2006). “Creating Effective Customer Service Training.”

SCG Training, White Paper. Accessed on December 30, 2006. From

www.quality-service.com/news/customer-service-training.html

Lenskold, Jim. (2004). Marketing ROI. McGraw-Hill: New York.

Levine, David I. (1995). Reinventing the Workplace: How Business and Employees Can

Can Both Win. Washington D.C.: The Brookings Institution.

Levitan, Lauren Cooks. (2001). Hot 100: B-to-C. Upside: Foster City, 2001

Lindner, James R. (1998). “Understanding Employee Motivation.” Journal of Extension,

370

http://www.quality-service.com/news/customer-service-training.html

http://www.iwmf.org/training/t_module2/page3.php


June 1998, Vol. 36, No. 3.

Linzmayer, Owen W. (1999). Apple Confidential: The Real Story of Apple Computer Inc.

San Francisco: No Starch Press, 1999.

Liu, Sonny. (2006). “What is Knowledge Management?” University of North Carolina,

Curricula Summary. Accessed on October 21, 2006. From

www.unc.edu/~sunnyliu/inls258/Introduction to Knowledge Management.html

Lundin, Stephen C., Christensen, John and Harry Paul. (2000). FISH! New York:

Hyperion, 2000.

Lundin, Stephen C., Christensen, John and Harry Paul. (2002). Fish Tales. New York:

Hyperion, 2002.

MacGregor, Diane. (2006). “Internal Communications: It’s Not Rocket Science!” Nova

Scotia: Crown, 2006.

Mailliard, Karen. (1997). “Sprint Retention via Training; Employee Retention at Sprint

Corp.; Special Report on Recruitment and Retention,” HR Focus, October 1997.

Maine Savings. (2004). “Maine Savings 2004 Annual Report.”



Malhotra, Yogesh Ph.D. (2004). “Why Knowledge Management Systems Fail.” Syracuse

University Case Study. Syracuse University, School of Management, 2004.

Marketing. (2005). Anonymous. “The Effects of Employee Satisfaction on Company

Financial Performance.” Marketing Innovators, White Paper.

Marwick, A.D. (2006). “Knowledge Management Technology.” Research Journal Paper,

2001. Accessed on October 21, 2007. From www.research.ibm.com/journal.html

371

http://www.unc.edu/~sunnyliu/inls258/Introduction


McEwen, William J. (2005). “Beyond Customer Loyalty.” The Gallup Management

Journal, April 30, 2005 Ed.

McHale, Tim, Hespos, Tom and Eric Porres. (2002). “B2B Marketers Have an Audience

Online.” Imedia Connection, eptember 4, 2002.

McIntyre, Nina. (2006). “New Value for Customer Relationship Management Systems.

Worldwide Marketing and Strategies Alliances, White Paper.

McShane, Steven L. and Mary Ann Von Glinow. (2004). Organizational Behavior.

New York: McGraw Hill.

Measuring. (2006). “Anonymous.” Measuring What Matters. Accessed on January 7,

2007. From www.customer-feedback-surveys.net

Mediation Definition. (1997). “Anonymous.” National Alternative Dispute Resolution

Advisory Council, Alternative Dispute Resolution Definitions, March 1997.

Melamed, James C. (1996). “Conflict Resolution in the Workplace.” The Mediation

Center. Accessed December 3, 2006. From www.to-agree.com

Meltzer, Michael. (2006). “Getting Value from Customer Management Investments.”

Active Management Techniques, White Paper.

Meltzer, Michael. (2003). Are Your Customers Profitable?” e-Solutions, American

Management Techniques, Whit Paper.

Mene, Patrick. (2000). “The Ritz-Carlton Hotel Company.” The Ritz Carlton Hotel

Company, Employee Newsletter, February 15, 2000.

Miecevole, Sintilia. (2006). “Characteristics of a Successful Entrepreneur.” Article to Go.

Accessed on December 1, 2006. From http://www.articletogo.com.

Milkovich, G.T. and J.W. Boudreau. (1997). Unions: Human Resource Management

372

http://www.articletogo.com/

http://www.to-agree.com/


(8th edition). Pp. 567-574. Homewood, IL: Irwin Publishers.

Mitchell, Tracey. (2003). “Customer Management Systems.” SPL World Group.

Accessed on March10, 2007. From cisworld.com

Morley, M., and N. Heraty. (1995). “The high performance organization: Developing

Teamwork where it counts.” Management Decision, 33(2), 56-64.

Neef, Dale. (2001). E-Procurement: From Strategy to Implementation. Upper Saddle

River: Prentice Hall, 2001.

Oakley, James L. (2004). “Forum for People Performance Management & Measure.”

Northwestern University Management Study. 2004

Obenreder, Robert. (2004). “Creating the Sustainable Workplace.” The American

Institute of Architects, White Paper, August 2004.

O’Connor, Alan. (2004). “Why Leadership Now?” Right Management Consultants,

White Paper, July 2004.

ODI. (2006). “The Voice of the Customer.” Organizational Dynamics Consulting,

White Paper.

Parham, Mark. (2003). “Hostile Work Environments.” Employee Development

Solutions article. Accessed November 25, 2006. From

www.employeedevelopmentsolutions.com/freearticles/Printer

Paton, Scott. (1997). “Service Quality, Disney Style.” Disney University Professional

Development Programs, The Disney University.

Pech, Richard F. (2003). “Memetics and Innovation: Profit Through Balanced Memetics

Management.” European Journal of Innovation Management, 2003:6, 111.

Pepitone, James (2006). “Knowledge Leadership: Job Satisfaction.” Pepitone Worldwide,

373

http://www.employeedevelopmentsolutions.com/freearticles/Printer


White Paper. Accessed November 25, 2006. From

www.pepitone.com/content/know-huma-satisfaction.asp

Perez, Juan Carlos. (2005). “Amazon Turns Ten.” PC World Magazine. July 15, 2005.

Pike Place Fish Market. (2006). “Our Humble Beginnings.” Anonymous. Accessed on

December 30, 2006. From www.pikeplacefish.com

Piper Trust. (2006). “Ritz-Carlton’s Approach to Customer Care Ideal For Nonprofits.”

Anonymous. Accessed on January 2, 2007. From

www.pipertrust.org/leadership/ritzcarlton.aspx

Platt, Stephanie. (2000). “Revolutionizing the Service Industry.” Hospitality.Net,

November 23, 2000. Accessed on January 2, 2007. From

www.hospitalitynet.org

Porras, J.I. and P.J. Robertson. (1992). “organizational Development: Theory, Practice,

And Research.” Business Week, pp. 106-109.

Pounds, Jerry. (2006). “Empathy: skill or personality trait?” Management Issues, May 17,

2006 Ed.

Prewitt, Edward. (2002). “Customer Relations.” CIO Magazine, January 1, 2002 Ed.

Quality. (2001). “Malcolm Baldridge National Quality Award 1992 Winner The Ritz-

Carlton Hotel Company.” Anonymous. Accessed on January 2, 2007. From

www.quality.nist.gov/Ritz_Carlton_Hotel_Co.htm

Recognition Programs. (2006). “Anonymous.” White Paper, Recognition Research.

Reichheld, Frederick F. (1993). “Loyalty Based Management.” Harvard Business

Review; March-April, 1993.

Reichheld, Frederick F. (1996). The Loyalty Effect: The Hidden Force Behind Growth,

374

http://www.pipertrust.org/leadership/ritzcarlton.aspx

http://www.pepitone.com/content/know-huma-satisfaction.asp


Profits, and Lasting Value. Boston: Harvard Business School Press.

Rieger, Tom. (2006). “Engaging Customers—All Day, Every Day.” The Gallup

Management Journal, September 14, 2006 Ed.

Ritz-Carlton. (2005). “Ritz-Carlton Customer Service Standards.” Company Website.

Accessed January 3, 2007. From www.ritzcarlton.com

Robbins, S.P. (1998). Organizational Behavior. Upper Saddle River: Prentice Hall.

Roche, Bill. (2006). “Why Some Employee Recognition Programs Backfire.”

TopResults.com, Article. Accessed December 3, 2006. From

http://www.topresults.com/Creating_an_Effective_Employee.asp

Rodwell, J.J., Kienzie, R., and M.A. Shadur. (1998). ‘The relationship among work-

Related perceptions, employees attitudes, and employee performance: The

Integral role of communication.” Human Resource Management, 37(3&4),

277-293.

Rohrbacher, Blake. (2001). “The Elements of Good Online Service.” E-Commerce

Guide, September 26, 2001 Ed.

Rosenbleeth, Mitch, Snarr, Tom and Corrie DeCamp. (2006). “Customer Relationship

Management Value Assessment.” Booz Allen Hamilton, White Paper.

Ross, J.E. (1999). Total Quality Management: Text, cases and readings. 3rd ed.

St. Lucie Press.

Ruddy, Anne C. (2001). “Compensating Employees in Today’s Complex Economy.”

Business and Professional Women, Winter 2001.

Salopek, Jennifer J. (2005). “The New Brain Drain.” Training & Development, June

2005 ed. Pp. 23-25.

375

http://www.topresults.com/Creating_an_Effective_Employee.asp


Savage, Susan. (2006). “Empowerment.” Valencia Community College, Thesis for

Management 2021.

Saxby, David. (2006). “If You Aren’t Measuring Customer Service, You Aren’t

Managing It.” Measure-X White Paper, 2006.

Schultz, D.E. (2000). “Learn to Differentiate CRM’s Two Faces.” Marketing News,

November 20, 2000.

Scott, J.L. (2001). “Customer Service: Accept Responsibility for Fixing Errors.”

Frugal Marketing article. Accessed March 11, 2007. From

www.frugalmarketing.com

Seldman, Martin and Jovita Thomas-Williams. (2005). “Savvy Training.” Training &

Development, May 2005 ed. Pp. 60-62.

Seldon, Larry and Ian MacMillan. (2006). “Manage Customer-Centric Innovation

Systematically.” Harvard Business Review, April 2006, pp. 108-116.

Selland, Jennifer. (2006). “Delivering Great Customer Service.” Customer Service

Magazine. Accessed on December 30, 2006. From

www.customerservicemanager.com

Senge, Peter M. (1990). The Fifth Discipline: The Art & Practice of The Learning

Organization. New York: Doubleday, 1990.

Sewell, G. (1998), “The discipline of teams: The control of team-based industrial

Work through electronic and peer surveillance. Administrative Science

Quarterly, 43. pp. 397-428.

Shah, Arvind D. (2007). “Customer Relationship Management: Practical Tips for

Successful Implementation.” DM Review, Editorial.

376


Shelton, Karen. (2001). The Effects of Employee Development Programs on Job

Satisfaction and Employee retention.” A Research Paper for the Graduate

College, University of Wisconsin-Stout, May 2001.

Siebert, Al. (2006). “Develop Resiliency Skills.” Training & Development, September

2006 ed. Pp88-89.

Singh, A.P. (1998). “Supervision and organizational effectiveness: Role conflict as a

Moderator. Journal of the Indian Academy of Applied Psychology, 24(1-2)

pp. 19-25.

Sirota, David, Mischkind, Louis, and Michael Irwin Meltzer. (2005). The

Enthusiastic Employee. Upper Saddle River: Pearson Education, Inc., 2005.

Slagle, Richard. (2006). “Communication: The Essential Workplace Skill.”

County Magazine. Accessed on December 3, 2006. From

www.county.org/resources/library/county_mag/county/132/comm.html.

Smith, Mark. (2006). “Maximizing Value of Employees and Human Capital.” Ventana

Research, White Paper.

Special Reports. (2006). “Anonymous.” Managing Teamwork. National Business

Research Institute, Inc.

Starkey, Ken, Tempest, Sue and Alan McKinlay. (2004). How Organizations Learn:

Managing The Search For Knowledge. London: Thomson.

Stein, Steven J. and Howard E. Book. (2000). The EQ Edge. New York: Stoddard

Publishing Company Limited.

Sterne, Jim. (2006). “You Don’t Have To Be Amazon.com To Target Your Emails.”

Target Marketing, October 2006.

377

http://www.county.org/resources/library/county_mag/county/132/comm.html


Sussman, Dan (2005). “Improving Work Life.” Training + Development, March,

2005 ed., pp. 49-51

Sussman, Dan. (2006). “Loyalty in the Workplace.” Training + Development, April

2006 ed.

Sutker, Scott. (2006). “Increase the effectiveness and impact of your marketing

Initiatives.” Centra Solutions, White Paper.

Swaddling, David C. and Charles Miller. (2001). Customer Power: How to Grow Sales

and Profits in a Customer-Driven Marketplace. Dublin: The Wellington Press,

2001.

Swaddling, David C. and Charles Miller. (2002). “Don’t Measure Customer

Satisfaction.” Quality Progress, May 2002 Ed.

Swift, R. (2001). Accelerating Customer Relationships. Englewood Cliffs: Prentice Hall.

Tambellini, Vicki T. and Tomothy Liu. (2005). “Are You Exceeding Your Customers’

Expectations?” Oracle Corporation, White Paper.

Tanoury, Doug. (2006). “Web-Enabled Customer Service Relationship Management.”

Independent CRM Consultant, White Paper.

Taube, Sandy. (2001). “Managing Employee Benefits.” Employee Benefits

Communications Services.

Tavantzis, Thomas N. and Lazar Emanuel. (2006). “The Road to Self-Knowledge.”

Training & Development, September 2006 ed. Pp. 99-100.

Teegarden, Jim and Bob Krok. (2006). “Create Customer Loyalty and Improve Your

Bottom Line.” Valpers Performance Partners, White Paper.

Ten3 East-West. (2003). “Employee Empowerment.” Business Ventures website.

378


Accessed on December 15, 2006. From

www.1000ventures.com/business_guide/crosscuttings_empowerment.html

Tetrick, Lois (1995). “Organizational Structure.” Organization & Management.

Accessed on December 21, 2006. From www.ilo.org

Trubisz, Scott. (2006). “Empowering Employees by Effectively Sharing Knowledge.”

Creditunions.com. Accessed December 21, 2006. From

www.creditunions.com/home/articles/printerfriendly.asp

Tschohl, John. (2006). “Empowerment: The Key to Customer Service.” Service

Quality Institute, White Paper.

Tweney, Dylan. (2000). “Who Needs Customer Service Online? You Do.” ECompany

Now. July 2000.

Uckun, Serder and Ofer Matan. (2007). “Employee-Customer Interactions: The Next

Wave in CRM Analytics.” Source Media, DM review Article.

Van de Lanotte, Xavier. (2003). “Searching for the V in CRM? Consider VCM.” VXTC

Consulting, White Paper.

Varelas, Elaine. (2005). Communicating in your culture: what are you really saying to

Employees?” Boston Works, article. October 3, 2005.

Villanueva, Julian, Yoo, Shijin and Dominique M. Hanssens. (2006). “The Impact of

Marketing-Induced vs. Word-of-Mouth Customer Acquisition on Customer

Equity.” UCLA Marketing Consortium, Research Paper.

Vinas, Tonya. (2001). “Viewpoint—Don’t Skimp On Employee Empowerment.”

Industry Week, December 12, 2001 Ed.

Walton, Mary. (1986). The Deming Management Method. New York: The Putnam

379

http://www.creditunions.com/home/articles/printerfriendly.asp

http://www.ilo.org/


Publishing Company, 1986.

Warholic, James A. (2005). “Internet Marketing – Online How to B2B B2C.” Internet

Marketing Newsletter, 2005. Accessed August 14, 2006. From

www.pwebs.net/marketing/articles/marketing-b2b-site-and-b2c-site-paper.htm

Waugh, Carol Ann. (2000). “New Customer Acquisition.” Xcellent Marketing, White

Paper.

Weber, Gretchen. (2004). “Lost time: Vacation days go unused despite more liberal

Time-off policies.” Workforce management, December 2004, pp. 66-67.

Welch, Jack and Suzy Welch. (2005). Winning. New York: HarperCollins.

Wellins, Richard, Byham, William and Jeanne M. Wilson. (1991). Empowered Teams:

Creating Self-Directed Work Groups That Improve Quality, Productivity, and

Participation. San Francisco: Jossey-Bass, 1991.

Wheatley, Margaret J. (1994). Leadership and the New Science. San Francisco: Berret-

Koehler Publishers, Inc., 1994.

Wheeler, Garrett. (2006). Customer Care at Disney ain’t Mickey Mouse.” Successories

At Ward Centre, Honolulu.

Wheelihan, Kathleen. (2002). “Sweat the Small Stuff for Great Customer Service.”

AchieveMax Consulting, White Paper.

Whitely, David. (2000). E-Commerce: Strategy, Technologies and Applications.

London: McGraw-Hill Publishing Co., 2000.

Wilkins, A.L. (1989). Developing Corporate Character. San Francisco: Jossey-Bass.

Wilkenson, A.D. and R.M. Wagner. (1993). “Supervisory leadership styles and state

Vocational rehabilitation counselor job satisfaction and productivity.

380

http://www.pwebs.net/marketing/articles/marketing-b2b-site-and-b2c-site-paper.htm


Rehabilitation Counseling Bulletin, 37(1), pp. 15-24.

Zemke, Ron. (2003). Delivering Knock Your Socks Off Service. New York: American

Management Association, 2003.

Appendices

Appendix 1

Source: Harvard Business Review

381


Appendix 2

382


383


384


Appendix 3

385


Source: Families and Work Institute

Appendix 4

386


387


388


389


Source: Navran Associates

390


Appendix 5

391


Appendix 6

392


Appendix 7

Source: Maine Savings

393


Appendix 8

MSFCU Employee Performance Review and Development Form

Employee: Jane Doe Date: April 2006

Dept/Branch: Operations Position: Employee

Supervisor: John Doe

Review Period: from 10/05 – 03/06

A. Review of Performance Factors:(Place an “X” in the column which best indicates where this employee stands in relation to what should be expected of him or her).

Rating Scale: N/A-Unable to evaluate5-Outstanding, far exceeds standard

4-High Performance, consistently exceeds standard3-Average-Generally meets standards of performance2-Usually below standard, needs improvement1-Unacceptable, consistently below standard, must improve

1 2 3 4 5N/A

Technical ability: Application of job knowledge

X

Acknowledge Members: Acknowledges members properly

X

Respect: Identifies Member’s needs and offers services

X

Knowledgeable: Knows their job and wants to learn

X

Accuracy/Consistency/Efficiency: Is precise and exact

X

Phone Service: Follows MSFC phone guidelines

X

394


Team Work: Works hard to be a valued team member

X

Courtesy: Is courteous to members and employees

X

Communication Skills: Communicates effectively

X

Exceed Expectations: Makes effort to exceed expectations

X

Confidentiality: Maintains confidentiality

X

Focus: Focuses 100% of their attention on members

X

Appearance: Maintains professional looking appearance

X

Motivation: High energy level with enthusiasm

X

Dependability: Gets job done, persistent, trustworthy

X

Attendance: On time, few unscheduled absences

X

Planning/Organization: Effective arrangement of work

X

1 2 3 4 5Overall Rating:

X

395


B. Employee’s Major Strengths (Identify the top three attributes) 1. Works very autonomously and takes ownership of the cards dept.

2. Effectively supervises dept. subordinate3. Understands the technical aspects of the cards dept.

C. Areas for Improvement/Development (Should be specific here)1. Continue to improve communication skills (presentation)2. Cultivate ideas for dept growth

D. Development Plans: Goals for Development/Timeframe (Measurable goals)1. Clean up lingering issues left over from conversion

Development Strategy: (how will they achieve the goals above-include training needed)

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

E. Employee’s Comments on This Review: ________________________________________

396


__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

F. Supervisor Comments: Jan, continue on the path you are on. You are doing a fabulous job and I look forward to the next 6 months.

Growth potential in present position and future growth potential for increased responsibilities: (should address potential)

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

Employee’s Signature: ____________________________ Date: ______________________

Rater’s Signature: ____________________________ Date: ________________________

397


**Attach separate sheet of paper if needed for additional comments. Specific comments on appraisals for those in supervisor positions may be addressed here if desired.

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Appraisals are due twice per year. The dates are performance period up to September 30 with appraisal due not later than October 15 and the next performance period thru March 30 with the appraisal due not later than April 15. Mentoring and coaching should be taking place on an on-going basis. Source: Maine Savings

Appendix 9

SECTION D

BENEFITS

EMPLOYEE BENEFITS

Eligible employees at MAINE SAVINGS are provided a wide range of benefits. A number of the programs (such as Social Security, worker's compensation, and unemployment insurance) cover all employees in the manner prescribed by law.

Benefits eligibility is dependent upon a variety of factors, including employment category. Peak-time employees are eligible to earn vacation time, as described in the policy section for Vacation Benefits. In addition, MAINE SAVINGS will pay for the cost of the employee's health benefits for Peak-time employees.

398


The following benefit programs are currently available to eligible employees: Medical Insurance Family Leave Holidays Jury Duty Leave Vacation Benefits Bereavement Leave Dental Insurance Life Insurance Long-Term Disability Pension Plan Educational Reimbursement Flexible Spending Accounts (Medical and Dependent Care

Reimbursement – "Section 125")

EDUCATIONAL OPPORTUNITIES

Employees are encouraged to engage in the educational activities that will enhance their abilities to their fullest potential. To encourage and help employees improve their on-the-job skills and knowledge by further education, the following policy has been developed in regards to expense incurred for such training:

When an employee attends a workshop, seminar, conferences, or a work-related course, etc., approved by their supervisor, the Credit Union will pay for the costs of the tuition. If an employee and his/her supervisor deems that a college course would be beneficial to both the employee and the Credit Union, the supervisor will make the recommendation to a member of Senior Management, who has the authority to make the decision that MAINE SAVINGS will pay up to $500.00 for the class. For an approved workshop, seminar, conference, or work-related college course, the Credit Union will pay up to $500.00 toward the cost of tuition, plus the cost of books. Maine Savings will only pay $500.00 for college courses once per semester. Employees may keep the books purchased by MAINE SAVINGS.

The Credit Union may pay up to $500.00 tuition plus the cost of books for any

management employee who has entered or desires to enter into a degree program.

Employees may keep the books purchased by Maine Savings. Maine Savings will only pay

a total of $500.00 per semester. A member of Senior Management must approve all

requests.

399


Tuition payments for college courses will not be paid until the course has been successfully

completed with at least a C average. Employees will provide a copy of their grade report and

receipts for reimbursement through their supervisor to the HR Department. HR will forward to

Accounting for payment.

BENEFITS CONTINUATION

The federal Consolidated Omnibus Budget Reconciliation Act (COBRA) gives employees and their qualified beneficiaries the opportunity to continue health insurance coverage under Maine Savings’ health plan when a "qualifying event" would normally result in the loss of eligibility. Some common qualifying events are resignation, termination of employment, or death of an employee; a reduction in an employee's hours or a leave of absence; an employee's divorce or legal separation; and a dependent child no longer meeting eligibility requirement.

Under COBRA, the employee or beneficiary pays the full cost of coverage at Maine Savings’ group rate plus an administration fee.

MAINE SAVINGS provides each eligible employee with a written notice describing rights granted under COBRA when the employee becomes eligible for coverage under Maine Savings’ health insurance plan. The notice contains important information about the employee's rights and obligations.

WORKERS' COMPENSATION INSURANCE

MAINE SAVINGS provides a comprehensive workers' compensation insurance program at no cost to employees. This program covers any injury or illness sustained in the course of employment that requires medical, surgical, or hospital treatment. Subject to applicable legal requirements, worker's compensation insurance provides benefits after a short waiting period or, if the employee is hospitalized, immediately.

Employees who sustain work-related injuries or illness should inform their supervisor in writing immediately. No matter how minor an on-the-job injury may appear, it is important that it be reported immediately. This will enable an eligible employee to qualify for coverage as quickly as possible.

Neither MAINE SAVINGS nor the insurance carrier will be liable for the payment of workers' compensation benefits for injuries that occur during an employee's voluntary participation in any off-duty recreational, social, or athletic activity

400


sponsored by MAINE SAVINGS.

EMPLOYEE RATE DISCOUNTS

As an added benefit of employment, full-time employees who have completed at least one year of employment may receive a discount of 1.00% below the present market loan rate for which they qualify. This rate discount applies to the following Maine Savings Credit Union products: residential mortgages, consumer loans, and credit cards. This discount requires on-time payment via automatic transfer from a Maine Savings Federal Credit Union direct deposit account.

If, for any reason, the employee terminates employment or is placed on probation, fails to maintain Credit Union accounts in a fully satisfactory manner, or the on-time automatic payment is discontinued, any and all rate discounts will be eliminated and adjusted back to the original note rate(s). Employees will not receive rate discounts or fee waivers on loans for which they are only an endorser or co-maker.

DELINQUINCY

Employees whose loans become past-due 30-days will lose their rate discount. Any and all rate discounts will be immediately eliminated and adjusted back to the original note rate(s). Upon request, a review showing at least 12 months timely payment history may result in returning the 1.00% rate discount.

SENIOR STAFF

In addition to the discount above, members of the Senior Staff are eligible for up to a 1% discount on their interest rate for the same credit union products. All other criteria remain the same. Source: Maine Savings

Appendix 10

Maine Savings Federal Credit Union Employee Survey

Please take a few minutes to complete this survey. Your specific answers will be completely anonymous, but your views, in combination with those of others, are extremely important. We will use the results to help chart areas for improvement within our organization and in service to our members. Please forward to Rob Carmichael when you have completed the survey.

1. Overall, how satisfied are you with MSFCU as an employer? (Please circle one number)

401


VeryDissatisfied

VerySatisfied

1 2 3 4 5 6 7

2. MSFCU’s leadership and planning (Please circle one number for each statement)

DisagreeStrongly

DisagreeSomewhat Neutral

AgreeSomewhat

AgreeStrongly

I have confidence in the leadership of MSFCU 1 2 3 4 5There is adequate planning of corporate objectives 1 2 3 4 5Corporate goals and objectives are communicated clearly

1 2 3 4 5

Management solicits feedback from employees and members on goals

1 2 3 4 5

Management empowers subordinates to do their jobs 1 2 3 4 5Management does not play favorites 1 2 3 4 5Management does not “say one thing and do another” 1 2 3 4 5

3. Corporate Culture (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

Quality is a top priority with MSFCU 1 2 3 4 5Outstanding member service is a value deemed important by MSFCU

1 2 3 4 5

Individual initiative is encouraged at MSFCU 1 2 3 4 5Nothing at MSFCU keeps me from doing my best every day

1 2 3 4 5

Corporate values are known and reflected in the way MSFCU does business

1 2 3 4 5

4. Communication (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

MSFCU’s Corporate communications are frequent enough 1 2 3 4 5MSFCU’s policies and procedures are communicated well 1 2 3 4 5I feel I can trust what MSFCU tells me 1 2 3 4 5There is adequate communication between departments 1 2 3 4 5Changes in procedures and policy are communicated timely

1 2 3 4 5

5. Career Development (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

I have a clearly established career path at MSFCU 1 2 3 4 5 I have opportunities to learn and grow 1 2 3 4 5 Training for my job is appropriate and adequate 1 2 3 4 5I have opportunities for training and education 1 2 3 4 5

If you have been here at least six months, please respond to these performance appraisal items

My performance counseling is timely and effective 1 2 3 4 5

402


My last performance appraisal accurately reflected myperformance

1 2 3 4 5

The performance appraisal system is fair 1 2 3 4 5

6. Your Role (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

I have adequate authority to provide outstanding service to our members

1 2 3 4 5

I am given enough authority to make decisions I need to make 1 2 3 4 5 I feel I am contributing to MSFCU’s mission 1 2 3 4 5 I have the materials and equipment I need to do my job well 1 2 3 4 5

7. Recognition and Rewards (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

If I do good work I can count on making more money 1 2 3 4 5 If I do good work I can count on being promoted 1 2 3 4 5 I feel I am valued at MSFCU 1 2 3 4 5 I am compensated appropriately for providing outstanding service to our members

1 2 3 4 5

MSFCU gives enough recognition for work that’s well done 1 2 3 4 5My Salary is fair for my responsibilities 1 2 3 4 5

8. Teamwork and Cooperation (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

I feel part of a team working toward a shared goal 1 2 3 4 5 My co-workers understand the importance of working together as a team to provide outstanding member service

1 2 3 4 5

Employees at MSFCU understand how teamwork impacts our service

1 2 3 4 5

“Politics” at this company are kept to a minimum 1 2 3 4 5

9. Working Conditions (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

I believe my job is secure 1 2 3 4 5 My physical working conditions are good 1 2 3 4 5 Deadlines at MSFCU are realistic 1 2 3 4 5 My workload is reasonable 1 2 3 4 5 I can keep a reasonable balance between work and personal life

1 2 3 4 5

403


10. Your Immediate Supervisor (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

My supervisor treats me fairly 1 2 3 4 5 My supervisor treats me with respect 1 2 3 4 5 My supervisor handles my work-related issues satisfactorily 1 2 3 4 5 My supervisor counsels and mentors me 1 2 3 4 5 My supervisor communicates effectively with me

1 2 3 4 5

My supervisor is knowledgeable on what goes on in my area 1 2 3 4 5My supervisor asks me for my input to help make decisions 1 2 3 4 5My supervisor is an effective manager 1 2 3 4 5

11. MSFCU’s Training Program (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

MSFCU provided as much initial training as I needed 1 2 3 4 5 MSFCU provides as much ongoing training as I need 1 2 3 4 5 MSFCU seeks my input as to what training I need 1 2 3 4 5

12. Benefits (Please circle one number for each statement)

DisagreeStrongly


AgreeSomewhat

AgreeStrongly

Overall, I’m satisfied with MSFCU’s benefits package 1 2 3 4 5

Specifically, I’m satisfied with the:

Amount of vacation 1 2 3 4 5 Sick leave policy 1 2 3 4 5 Amount of health care paid for

1 2 3 4 5

Dental Benefits 1 2 3 4 5401k plan 1 2 3 4 5Life insurances 1 2 3 4 5Salary 1 2 3 4 5Flexible Spending Accounts 1 2 3 4 5Education Reimbursement 1 2 3 4 5Holidays 1 2 3 4 5

404


What, if any, changes would you like to make to MSFCUs benefits package?

13. How long do you plan to continue your career with MSFCU?

Less than a year One to two years Two to five years More than five years

Don’t know

14. Would recommend employment at MSFCU to a friend?

Definitely not Probably not Maybe Probably would Definitely would

15. What can MSFCU do to increase your satisfaction as an employee?

The following questions are for analytic purposes only. They will not be used to try to identify any individual. However, if you feel uncomfortable answering any of them do not do so. Whether or not you leave any questions blank, please return your questionnaire.

16. How long have your worked for MSFCU?

Less than one yearOne year to less than two yearsTwo years to less than five yearsFive years to less than ten yearsTen years or more

17. What is your age?

Under 2121 to 3435 to 4445 to 5455 or older

18. What area do you work in?

Retail Support

405


Thank you for answering this survey.Source: Maine Savings

Appendix 11

To: All Maine Savings Federal Credit Union Employees

FR: John Reed

RE: Employee Survey

Thank you for your outstanding support in response to our employee surveys this summer. We had a 89% response rate with the surveys. The information gained from the survey will help to keep our organization on the continuous improvement journey.

As we continue to grow and evolve, your feedback is important to help us improve in every area of our business. We used last year’s results to focus on a number of areas including, training, communication, and recognition of employees. Hopefully you have witnessed an increase in the scope of our training program, improved communication flow with more emphasis on staff meetings, a quarterly newsletter, a suggestion program, and the Cecil C. Porter Quality Award.

406


I will summarize the results of the surveys below, by briefly discussing areas we need to improve on and areas to we must continue to sustain for peak performance. Our next step is to convene a focus group made up of a cross section of employees to help clarify many of the survey results and gather additional feedback. Rob Carmichael will be asking some of you to participate in the focus group. This is a voluntary request, but I do urge you to participate if asked. This is your opportunity to make MSFCU a better place to work and grow. Rob will contact you in the very near future.

Again, I appreciate your support and participation in the survey process. Your participation in this survey has been and remains, completely anonymous.

Thank you for being the catalyst toward continuous improvement, and for being a part of the Maine Savings Federal Credit Union team.

John

407


Overview

PROCESS. The survey was conducted using a combination of computer and paper. Some employees preferred to use the paper process out of a concern for confidentiality. A total of 57 surveys were completed for a response rate of 89%.

RESULTS. Comparing 2004 with 2005 we increased score in 35 questions while decreasing in 13 and staying the same in 9. The most significant increases (3 tenths or more) came in the following questions:

--question 2d “Management solicits feedback from employees and members on goals.”--3b “Outstanding member service is a value deemed important by MSFCU”--3c “Individual initiative is encouraged at MSFCU”--3e “Corporate values are known and reflected in the way MSFCU does business” --4a “MSFCU’s Corporate communications are frequent enough”--4b “MSFCU’s policies and procedures are communicated well”--6d “I have the materials and equipment I need to do my job well”--8c “Employees at MSFCU understand how teamwork impacts our service”--11b “MSFCU provides as much ongoing training as I need”

The most significant decrease (more than 3 tenths decline) came in question 12h under benefits. This question asks about the level of satisfaction with salary. The only other question that decreased more than 3 tenths was question 7a “If I do good work I can count on making more money”. The remaining questions that showed a decrease are as follows:

--2a “I have confidence in the leadership of MSFCU” (score 4.1)--2b “There is adequate planning of corporate objectives”’ (score 3.8)--2f “Management does not play favorites” (score 2.8)

--4c “I feel I can trust what MSFCU tells me” (score 3.6)--6a “I have adequate authority to provide outstanding service to our members (score 4.1)--6b “I am given enough authority to make decisions I need to make” (score 3.9)--7a “If I do good work I can count on making more money” (score 2.9)--7b “If I do good work I can count on being promoted” (score 2.9)--7d “I am compensated appropriately for providing outstanding service to our members (score 3.3)--8d “Politics at this company are kept to a minimum” (score 2.8)--12c “Sick leave policy” (score 3.8)--12h “Salary” (score 3.3)--12j “Education reimbursement” (score 3.9)

408


SUMMARY OF SURVEY RESULTS

1. OVERALL SATISFACTION WITH MSFCU. This area showed an increase from last year from an average of 3.9 to 4.2. Most of you responded on the positive end of the scale with only 12 responses noted in the neutral or below position on the scale. The majority of responses fell in the highest two responses (very satisfied) range on the scale. Overall employee satisfaction with employment at MSFCU is quite good though there is certainly room for improvement.

2. LEADERSHIP and PLANNING. This area indicates some degree of concern on your part. Three out of the eight questions showed a decrease in favorable response. This is troubling in that we spent significant time last fall attempting to communicate the direction of Maine Savings to the entire company. The area of communications is clearly a concern as reflected in the surveys. Consistency between what is said and what is actually done is a concern. There continues to be a concern over the question, “Management does not play favorites”. You did indicate much improvement in how management solicits feedback from employees. This entire section will require more analysis and discussion.

3. CORPORATE CULTURE. Once again this year, your responses made it very clear that quality and outstanding member service are well understood as part of our cultural ethic. The survey indicates improvement in 4 of the 5 questions. We will work to ensure that our corporate values are shared and understood by all. This is a positive area that we need to sustain.

4. COMMUNICATION. The results indicate small improvement in this area overall though not significant. Four of the five questions did improve but question 2c decreased. The question, “I feel I can trust what MSFCU tells me” showed a decrease. We need to analyze and understand all the problems with communication. This is a big, complex area that we will focus our efforts on.

5. CAREER DEVELOPMENT. Most responses fell in the positive side of the scale in this area. There are however, clear opportunities to improve training and to better communicate career path direction for each employee. This is an area that will continue to receive significant focus over the next year.

6. YOUR ROLE. The responses in this section were mixed. This year you appear to be pretty satisfied that you are contributing to MSFCU’s Mission and have the materials, equipment, and tools available to do the job well. Fewer of you feel empowered to do your jobs well and have the authority to make decisions you need to make.

7. RECOGNITION & REWARDS. This continues to be an area of concern for many employees. In about half of the categories the responses fell in the neutral and below part of the scale. Three questions showed a decrease from last year. Focus groups will

409


be helpful to provide specific areas of concern, particularly where we added some formal recognition programs this year.

8. TEAMWORK & COOPERATION. Most of you believe you understand the effects of teamwork in providing outstanding member service, and that you feel a part of a team working toward a shared goal. There was significant movement from the lowest responses to the upper end of the scale. However, on question four, many of you suggest that “politics” impacts the effectiveness of the teamwork and cooperation within MSFCU. We will continue to explore the meaning of these results as part of the focus group effort.

9. WORKING CONDITIONS. The responses to questions in this section were for the most part, overwhelmingly positive and increased or stayed the same in all five questions. Most are pleased with their physical environment, workload, and balance between work and personal life. Unfortunately over 40% of you answered either neutral or less positive about your job security. We need to explore that question more deeply to better understand why those responses are as they are.

10. IMMEDIATE SUPERVISOR. The responses to these questions improved across the board this year. The average response is above 4.0 on every question. (Agree Somewhat-Agree Strongly) Fewer of you answered in the lowest portion of the scale this year. Still, there is room for improvement, particularly in supervisor communication. We need to continue the education and development process with a focus on communication.

11. MSFCUs TRAINING PROGRAM. We showed improvement from last year though there is room to get better. Most responses were positive. Nevertheless, your feedback indicates there is room for improvement in the training program. We need to solicit more input from employees on the type of training needed.

12. BENEFITS. 81% of you responded that you were satisfied with the MSFCU’s benefits package. The decreases this year came from the questions in the areas of salary, sick days, and education reimbursement. We continue to search for opportunities to keep health care costs down and maintain a competitive benefits package. This area will be continually reviewed to provide the best benefits possible for all employees. The issue of salary was clearly a concern as indicated in the written comments. Benefits will continue to be reviewed in order to be as competitive in the market as possible.Source: Maine Savings

410


Appendix 12


411


Appendix 13

RECOGNITION FOR EXTRAORDINARY SERVICE March 10, 2005

Purpose: This document outlines the process for recognizing employees for exceptional service.

Objective: Provide appropriate recognition to employees who provide exceptional member service.

Reinforce behaviors that contribute to exceptional member service. Recognize an employee with the Cecil C. Porter Annual award for

exceptional Service.

Discussion:

Employees or their Supervisors frequently receive letters or emails commending them for their outstanding service either for a special act or for a period of time. These commendations are generally shared with the immediate supervisor and some times with the Senior Staff including the CEO. The rest of the organization does not hear or see the great things that some of our employees are doing to provide the level of service we desire and our members deserve. Our CEO reads those letters he receives to the Board of Directors at our monthly meetings. Our Chairman asked the CEO to find a way to recognize these exceptional employees. Additionally, we committed at the last annual meeting to present the Cecil C. Porter award for exceptional member service to a deserving employee.

Concept: The recognition process should be a progressive one that increases to a point with each letter of commendation. It is important that we keep track of the positive letters/emails for each employee. Therefore, supervisors will need to provide the VP of HR/TNG a notice each time an employee receives a commendation. HR will track the number for each employee with back up at the supervisor level. We will recognize employees for each award they receive. The level of recognition and type of award will vary depending on the number of commendations. The information tracked by HR will be one part of the criteria used to select the annual Cecil C. Porter award winner.

Criteria and award level: These awards are for a letter or email thanking employees for exceptional service beyond what is normally expected as part of their main role or function. This is activity within a 12 month time period. The VP of HR will forward these to the CEO to determine what level of recognition is warranted.

One (1) letter/email

412


Email notification to all employees Letter from CEO Recognition at a Board meeting

Two (2) letters/emails Email notification to all employees Letter from CEO/Chairman Mention in the newsletter $10.00 Subway gift card Recognition at a Board meeting

Three (3) or more Letters/Emails Email notification to all employees “WOW” Service Certificate Letter from CEO/Chairman Mention in the newsletter $25.00 Dinner Gift Certificate Consideration for Annual Cecil C. Porter Award Recognition at a Board meeting

Cecil C. Porter Employee Service Passion Award: Provided for superior service passion and performance excellence

throughout the previous 12 months while providing the highest quality service to MSFCU members/employees.

Nominees will come from Supervisors and Managers to the Senior Staff. The Senior Staff will select the person who’s performance best reflects the legacy of Cecil Porter and the Mission, Values, Promise and Service Standards of MSFCU.

The winner will receive:o Name engraved on a plaque mounted outside the boardroom.o A small plaque with name engravedo A framed Certificateo A letter from the CEO/Chairmano A special article in the news lettero $50.00 Gift Certificate for dinner.o Recognition at the annual meeting.


Appendix 14

413


Credit Life & Credit Disability Incentive Programs

414


415


CECU

2004 PAYMENT PROTECTION RECOGNITION PROGRAM

The “CECU 500” recognition program is your chance to start your engines and get ready for the next adventure challenge!

2004 Individual Monthly Recognition Awards

During each month (January - December) all lenders who successfully offer Protection Solutions, as part of the loan process, will have an opportunity, based on policy categories, to earn per policy incentives each month. (See below for policy tiers and awards).

NUMBER OF LIFE & DISABILITY POLICIES SOLD (monthly)*

(1 – 10 Policies) (11 – 16 Policies) (17 – 22 Policies) (23+ Policies) $2.00 per policy $3.00 per policy $4.00 per policy $6.00 per

policy

*Each employee may qualify for only one of the above categories. Life counts as one policy and disability counts as one policy.

The CECU 500 Adventure ChallengeThere will be two adventures awarded at year-end 2004.

To be the first under this checkered flag you must average 30% for Members Choice Disability and 35% in Members Choice Term Life from January to June of 2003 and July to December 2003.

The adventures take place in July 2004 and January 2005.Everyone who qualifies will attend.

416


Individual Year-End Grand Prize Awards:There will be two Individual Grand Prizes awarded at year-end 2004.

Individual with the Highest # of Life + Disability Policies for the year (Jan- Dec 2004):

$250.00 Cash Award

Individual with the **Highest Average Combined CL/CD *Participation % for the year (Jan – Dec 2004). *Individual must achieve both credit union goals of 35%

Life and 30% Disability to qualify.

$250.00 Cash Award

**In addition, to qualify for this 2nd award, individuals must also meet the following branch lending criteria: All MSRs must close an annual average of 18 loans per month.

DISCLAIMERS FOR RECOGNITION PROGRAM Qualified participants for this program include all lenders. This may

include Member Service Representatives or Loan Processors who actively offer Protection Solutions to members.

Year-end award recipients must be employed by the credit union for a minimum of three months in order to qualify for award.

Year-end award – Only one cash award may be earned per employee. If the same lender earns both awards, then the second prize will be awarded to the next highest qualifying lender.

All awards are subject to applicable tax as defined by IRS incentive parameters.

Recognition program parameters may change at any time without prior notice.

Approved By: _______________Date Approved ______________

417


GHI CREDIT UNIONPAYMENT PROTECTION INCENTIVES

PAYMENT PROTECTION SALES IN 2000 HAD SOME GOOD TIMES AND NOT SO GOOD TIMES. LOAN VOLUME DOES HAVE AN IMPACT ON SALES, HOWEVERYOU HAVE THE GREATEST IMPACT!!! OUR RESULTS FOR 2000 ARE DETAILEDBELOW: L D BOTH

1ST QUARTER 358 = 139 14 205 $ 7512ND QUARTER 608 = 240 30 338 $ 13153RD QUARTER 674 = 296 27 351 $ 14224TH QUARTER 605 = 317 31 257 $ 1154TOTAL 2,245 992 102 1,151 $ 4,642

PARTICIPATION RESULTS: LIFE 11.09% DISABILITY 5.70%

PREMIUM RESULTS: $40,368 MONTHLY

2001 TEAM GOALS!!!

PARTICIPATION GOALS: LIFE: 20.00% DISABILITY: 10.00%PREMIUM GOAL FOR 2001: $44,626

2001 INDIVIDUAL REWARDS

GHI CREDIT UNION AND CUNA MUTUAL GROUP HAVE JOINED TOGETHERTO OFFER A MORE LUCRATIVE INCENTIVE PROGRAM TO REWARD YOU FORPERFORMANCE:

PER SALE INCENTIVE: $2.00 SINGLE LIFE/JT. LIFE $3.00 DISABILITY $5.00 BOTH

418


LOAN PROCESSORS/LOAN OFFICERS WILL BE REWARDED BASED ON PER SALE PERFORMANCE. EACH EMPLOYEE HAS A GOAL OF 10 SALES PER MONTH OR 30 SALES PER QUARTER.

ALL TOP PERFORMERS WILL BE ELIGIBLE FOR…. A SURPRISE!!!EACH QUARTER PERFORMANCE OF STAFF WILL BE EVALUATED BY MANAGEMENT AND RECOGNIZED BASED ON ACCOMPLISHMENTS DURING THAT QUARTER. WILL YOU BE ONE?? ACCOMPLISHMENTS COULD INCLUDE TOP SALES, TOP PERCENTAGE PROTECTED, OR MOST IMPROVED.

419


MNO CREDIT UNION

Successful Incentive Examples

Since every credit union is individual and distinctive, these

examples are only a few of the many incentive programs that

have been implemented throughout the credit union industry.

These are actual examples from the states of Illinois, Iowa, and

Michigan (most of the verbiage is exactly as it was handed to

the staff).

As with any credit insurance program, there are a number of

factors that influence the actual premium results.

Some of these influencing factors include:

Rate of growth or shrinkage in the loan portfolio Management Support/Accountability of staff Consistency of Training Rate/plan adjustments Knowledge level of the loan staff Attitudes of the staff towards the product Tracking (individual/group) Incentives (size, type, consistency, existing Vs new)Source: Cuna Mutual

420


Appendix 15

421



422

Documents

Emerson ism Dissertation