How are you engaging your customers?

To create satisfied customers doesn’t really make you successful anymore – apart from creating value you also need to engage your customer to grow your revenue.

Customers are not just looking for the same product or service they have only cheaper or with an extra feature – they are looking for something radically useful or something that creates meaning for them.

Every market matures and in every mature market the product/service looks more and more alike. It will be based on the same technology made on the same factory or delivered after the same principles. Not much room for differentiation other than price that shrinks the pie for all market players. All products will eventually satisfy customers but not necessarily engage them.

To engage customers you will need to go beyond the product or service itself. It is not about what you do, it is about why you do it and how you do it.

 "Always start with why" Simon Sinek

Customer engagement is an emotional relation between the customer and one or more actors associated with the company. It is certainly possible to create an emotional relationship between a customer and a product/service brand as is seen with luxury items and cars; however this is not possible in most markets.

Relationship with the product itself

When products and services become more alike it becomes more important how it is made and what the overall purpose of the producing company is. It is not anymore about transactional selling but more about a relationship and eventually being part of a movement.

Relationship with the company

Customers don’t buy from you just because you want a lot of money but they might want to buy from you if your company is trying to support society or making the world a better place. The low priority of CSR in many companies, will not work in the future. It does not inspire customers or employees. The new hyper growth companies predominantly from the US, all has a strong purpose in the centre of their activity. Google, Apple, Tesla, Facebook and similar are not in the business just to make money – they want to make a difference also. This engages not only employees but also customers.

Relationship with touch points

The rise of the internet and social media has made many companies forget that their employees are vital in creating engagement with customers. Unfortunately only 13% of all employees worldwide are engaged and hence capable of creating customer engagement. The service aspect has also been neglected even though there is a higher probability in creating an engaged customer through a service issue than there is through a normal successful delivery.

The massive advertising on social media that looks the same as the old newspaper advertising can create awareness but is not successful in creating engagement. Most companies miss the point of having their senior managers’ active on social media (Only 28% of CEO has social media accounts). CEO’s have an opportunity to engage in conversations about purpose and sustainable production that can catapult engagement. Leaders like Tim Cook (Apple), Elon Musk (Tesla) Eric Schmidt (Google) are all very active in engaging both customers and employees.

Relationship with other stakeholders

The most important consumer buying decisions are heavily impacted by people close to the consumer and different interest groups. You cannot ignore Greenpeace, Amnesty international or trade unions anymore. The company need to include all stakeholders into their strategy formation and make it transparent. A transparent company does not need to hide behind a brand.

The link between Employee and Customer engagement

Gallup has shown that there is a strong relationship from Employee Engagement over customer engagement to financial results. Companies that manage to engage both customers and employees have 240% better results on performance related parameters.

"Companies that engage both customers and employees have 240% better results on performance parameters." Gallup

Why corporations love delegation and are scared of Empowerment

Not only does empowerment of employees take the load of the task away from managers, it also takes the load of the decision away, making the role of the manager much easier. The time the manager does not have to be in the operation, she can work on the operation – improving it.

Having more decision power closer to the customers and the employees create a more agile organisation that can respond to rapid or local changes without HQ being awake.

Decision power and responsibility is a powerful motivator that significantly increases Employee Engagement and through that increases customer engagement and financial results.

Most employees also tend to grow capabilities faster when trusted with decisions rather than being locked in a training room for mandatory compliance training. So how come many companies don’t really deploy empowerment?

So why don’t organisations embrace Empowerment?

Many organisations now see themselves as values based. This should in principle means less rules and higher ability for the individual contributor to have responsibility and decision power over what they do. Often in the same companies there are more rules than ever, often camouflaged as a need to meet governance, compliance or to lower corporate risk. Many of these rules are created to protect the organisation against potential actions of the individual employee - a strange concept indeed. 

Decisions are concentrated around a few select senior managers and delegation trickles down the organisation in a way that often is counterproductive to what individuals and departments are trying to achieve.

In these organisations it looks like control and hierarchy is more important than making the company great and able to create value. There are powerful forces that make it so, as senior management is always benefitting from status quo.

Their operating logic dictates that highly paid individuals knows best and needs to decide. While this might be true it completely disarms the organisation and lowers the engagement of the entire organisation. This can become a threat for the survival of the organisation. People without engagement stay and get their pay check but they are not motivated and do not contribute.

The direct manager

When divine decision does not create the intended greatness the spotlight is on the middle manager responsible for the implementation close to the employees. Creating an environment that punishes only increases the middle managers need for control and somebody to direct the blame to.

At the same time, it has become so popular to coach that managers call everything they do and have always done for coaching. Reality is that most managers are still coaching for compliance: Trying to manipulate the employee into what the corporation thinks is the right behaviour.

Delegation is a great tool if it is more important to stay in power than to create a great company and all stakeholders should analyse if their company has a delegating or an empowering culture. This is likely to determine their fate.

Seek companies with an Empowered Culture

Conclusion – Imagine the unimaginable. Chapter 7 of "How Google Works"

Technology driven change is outpacing the ability to train people in new skills putting unprecedented pressure on companies and societies. The technology is disrupting most known mature industries. In the preindustrial era the upper-class household was the centre of economic activity replaced by the corporation after the industrial revolution. In the 21^st century the corporation is being replaced with The Platform. A platform does not have a one way relationship with is customers and suppliers. There is a lot more of give and take – a place to connect like amazon.

Companies have a choice. They can operate the way they have always operated and only use technology to optimise their current operations or they can view it as the powerful force of disruption that it really is. Technology and innovation should be high on the CEO’s agenda.

Innovation means change and for many companies status quo is a much more comfortable place to be. At a corporate level most innovation initially looks like very small opportunities to a large company – not worth the time and effort. At the individual level people within big companies aren’t rewarded for taking risks but are penalised for failure. The payoff is asymmetrical so the rational person opts for safety.

The very nature of big companies is to be risk adverse and attack big change like the body attacks an infection. Google itself did well in Web 1.0 that was based on viewing text and images and basic transactions. It also thrived in Web 2.0 where is became a gigantic shopping mall and a place where people could do all sorts of things including complex transactions but was itself disrupted by Web 3.0 - the social and mobile web.

The solution is to always ask yourself the hardest question. Understand what to do about the future, what you see for the business others may not see or sees and choose to ignore.

“I keep my attention on the questions I need to ask so that I can catch the issues of the future” Clayton Christensen.

CEO´s should not only focus on the core business but also on the future. Companies rarely fold because of operational issues but more often because of a technological disruption of their industry. The question is not to ask what will be true but what could be true.

Do customers love your products or are they locked in by other factors that might evaporate in the future? Do your decision making processes lead to the best decision or the most acceptable?

Governments would benefit of including support for the disruptive elements of business, but tend to do the opposite and defend the incumbents as they have power, money and many workers. Tesla did not only fight the incumbent automakers but also the government that tried to prevent Tesla to sell directly to consumers.

Google believe in the power of technology and its ability to make the world a better place. Most big problems are information problems that can be solved with enough data and the ability to crunch it.

Google believe the technological disruption is a gift even if it means that somebody someday would create a technology that eventually renders Google irrelevant. Some might find this chilling but Eric Schmidt and Jonathan Rosenberg finds it inspiring.

You cannot separate marketing and advertising from employee engagement.

 “I think spending your life trying to dupe innocent people out of hard-won earnings to buy useless, low quality, misrepresented items and services is an excellent use of your energy”

Jerry Seinfeld at Clio Awards

Maybe Seinfeld was joking - maybe he is exposing one of the biggest weaknesses of the outdated economic thinking of the industrial age: The idea that marketing and advertising can change the customers’ perception of a product (or service as a product) through communication decoupled from the actual product.

This might be possible before the customer starts to engage with the product but will change nothing about the product itself. The better the advert is created, the larger distance it will create between the customers’ expectation to the actual performance of the product.

Most mature organisations that follow the logic of the industrial age is focused on large scale operations to lower the costs of the product or service they deliver to the customers – the focus is not on the customer but on the operation itself. This made sense in the early days of the industrial revolution where the manufacturer had more power over the consumer – unfortunately it is still the mindset of most large corporations today. They compete with mature products that look more or less the same as their competitors as their original competitive advantage has been eroded many years ago. As a result they focus even more intensely on optimising their internal operation to deliver the same non-competitive product cheaper.

This means the only competitive element left is price or the sales/service experience itself.

However these organisations treat their sales and service organisations as a cost and not an asset.  Headcount cuts and outsourcing of service organisations to low cost jurisdictions does not demonstrate a belief in these organisations ability to make a difference for the customer.

They do not believe in creating customer engagement thought employee engagement – they believe in cheaper, automated one size fits all service … or lack of. The adverts promise of an often emotionally strong experience is replaced with an automated rules based response from a starved and stressed organisation.

Especially when things go wrong: “Sorry but according to the rules this is not possible”. We have all tried that one.

You do not create satisfied customers by giving them less than what they expect. It gets even worse when mistakes or errors happen and the customer is faced by an automated rules based system. You risk creating antagonistic anti sponsors that apart from mot buying will cause others not to buy either.

A dissatisfied customer represent an opportunity to create an engaged customer. This will only happen though contact with an engaged service organisation that is empowered to solve the customer’s problems above and beyond expectations, an organisation that truly cares about their customers and shows it. 

Employee engagement matters!

Competitive advantage can only be created through people.

Since the financial crisis the focus of some corporations has turned from a desire to create value to a perceived need to extract value from their existing business. This has mainly been achieved by starving the existing business through headcount reductions and outsourcing of corporate support functions to cheaper jurisdictions.

 Included in the cost savings has been customer direct and indirect support functions – in reality revealing that these corporations has limited belief in these functions as assets able to deliver revenue and growth to the corporations. This also means less delivered to the customers for the same price; as a CEO of an insurance company put it: “A more disciplined offering to our customers” – a lyric formulation for less.

Reducing frontline employees is a dangerous game as automated response systems and web based support might not be able to create the emotionally connection with customers that most corporations marketing campaigns are based on. What customers expect and what they get will be quite different – automated and generic response does not create engaged customers.

These kinds of headcount reduction and reductions in funding to training programs, maintenance of equipment and R&D to improve the bottom line has not exactly been rare. There might not be anything legally wrong with doing this but ethically there can be issues.

From a governance issue, under-investing in people and under-investing in the revenue generating part of business is considered stealing from the future to benefit today. This is especially a problem when executives are paid based on P&L metrics and share compensated affected heavily by earnings per share. It could be seen as stealing from the future for own personal gain.

The increased cashflow from these activities has predominantly been reinvested in the company’s own equity as pointed out in the Harvard Business Review article: Profits without prosperity, with increases in share price as a result. The problem is that this is not an investment in the business future and based on assumption that the existing base of competitiveness is relatively safe. Companies might believe there is safety in size, like Kodak did or safety in technology as Nokia did. They might think that their brand is the strong enough – like Blockbuster or Motorola did.

Unfortunately for these companies there is a new breed of predator in the corporate jungle. Companies like Google, amazon, Netflix, Tesla and Apple are redefining the rules of the game in ways the more mature companies has no response to within their current way of thinking. 

The mature companies think that the new companies have created their competitiveness through people-less assets like computers, artificial intelligence, automation, robots and Internet based offerings and assume that reduction in headcount is the way forward.

What they have failed to understand is that all of these companies only create competitive advantage through their people and not at the expense of their people. If they wanted to take a closer look they would see companies highly focused on getting the right kind of people, making sure they are continuously developed and satisfied.

These companies know what is well established outside the economic and financial circles – probably also in these circles but not stated publicly – that human beings are not only rational people but more importantly emotional beings that are affected by the social context around them.

They make sure that their employee are not only rationally connected to the companies though satisfaction but more importantly connected emotionally through engagement. Connected to the purpose of the corporation – the “Why” of the corporation.

These companies also have a belief that employees are the only true source of competitiveness, even if it manifests itself through products, systems, knowledge or other employee made artifacts.

Employees make a difference. Employee engagement matters.

Employee engagement is not something you do to people – it is something you do with people.

For many years the logic behind the service profit chain has dominated the way corporations treat their employees. The theory behind service profit chain suggests that satisfied employees create satisfied customers that in return stay loyal and affect corporate results. 

This has changed with recent Gallup research that was unable to verify the link between employee satisfaction and results. It could have been that satisfaction used to give corporations an advantage, but failed to do so today. It could be that satisfaction has turned into a qualifying rather than a winning attribute of the organisation. 

Gallup did however identify a clear link between corporate results and employee engagement. The “Employee satisfaction” concept has its roots in fulfilling of employee’s needs, wants and aspirations and is seen as something the corporation does for its employees. As such it is, for the employee a passive arrangement, where the corporation can decide what rewards it is willing to offer in return for the employee staying with the corporation. 

The psychological contract between employer and employees is not limited to tangibles, but has been seen mainly as a rational agreement and as such something corporations impact though HR activities, predominantly compensation and benefits. Satisfaction can be improved by job safety, promotions, empowerment, appraisals, communication and similar activities focused on the employee and the job role.

The problem is that money and benefits above a certain existential minimum does not motivate people to do more as Gallup proved – the path to improved performance is not though increases in tangible benefits – but through an increase in engagement. So the bravest of HR departments has turned to measuring Employee engagement.

As in Gallup’s engagement surveys, most employee engagement survey show significantly lower results than satisfaction surveys, something that suggests a problem. No doubt a lot of management teams like the old satisfaction survey that could be done and ticked easily without rocking the boat. 

The new engagement survey could be seen as a threat and not as an opportunity to gain competitive advantage. The other problem for the HR departments are that where employee satisfaction can be improved through systems and programs focusing on the lower part of the organisations, improving employee engagement is a completely different game. 

Although in HR’s areas of influence - key elements in creating engagement, like personal growth and developments are a hard sell for HR in a rational skills focused world. Other areas of creating engagement are outside the reach of HR.

The newest neurological research of human behavior and decision making processes has firmly established the important roles that both emotions and social context plays as powerful modulators of what was once believed to be a predominantly rational process, which put us apart from the animals. 

The Merriam-Webster’s definition of engagement: “emotional involvement or commitment”, confirms this is true for creating engagement also. Research suggests that engagement is influenced by the level of which employees identifies themselves with the organisation. The purpose, vision and leadership of the organisation play a vital role in engaging employees and the connection is emotional.

Why the corporation exist and what its purpose is become a potential powerful source of employee engagement. Unfortunately the post crisis corporations have had so much focus on improving profits that they have forgotten that creating profits is not a strategy – it is an outcome of a successful strategy.

Organisations that want to survive and thrive will eventually need to focus on a higher purpose that improves the situation of customers, employees and other stakeholders than just shareholders.

So employee engagement is not just something that can be designed by a HR department and injected into the workforce, it is about changing the fabric of the department or the corporation itself.

Employee engagement is not just about improving, it is about transformation. To transform people you need to transform the organisation and its purpose and goals. Visionary companies know this.