It is time to look beyond the ‘service with a smile’ principle

When Manchester Business School professor of business ethics and corporate social responsibility Rosa Chun, approached companies to find out whether happy staff make happy customers (and therefore, happy shareholders), some were dismissive. “What are you doing wasting taxpayer’s money researching something everybody knows the answer to?” they asked.

They were reflecting the fact that over the past few years the happy staff/happy customers thesis – known as the Service Profit Chain model – has risen rapidly in status from “discovery” to “fact”. So they’ll be surprised by her findings.

Chun interviewed 10,000 people (half customer-facing staff, half customers) in 49 business units across 13 UK retail organisations in financial services, food retailing, telecommunications and insurance – all organisations where the customer’s interaction with staff forms a large part of the total brand experience, and therefore likely to be a major controlling factor in the companies’ performance.

The results, she told the Thought Leaders International Conference on Brand Management at the University of Birmingham last week, are stark and simple: there is zero evidence of any link between happy staff (willingness to recommend a job here, job satisfaction, etc) and happy customers (willingness to recommend, overall satisfaction, etc). When the data is plotted on a graph the line is absolutely flat.

Digging deeper into the data, there are some companies where staff happiness and customer happiness coincide. Comparing branches across the same large grocery retailer for example, Chun found that customers were happier in stores where staff where happier. But the opposite can also be true. In one financial services company the unhappier the staff in the branch, the happier the customer: a strong negative correlation. In yet other cases, staff are happy but customers are not.

Chun’s findings are important both in terms of understanding what’s going on, and knowing what to do about it.

The Service Profit Chain assumes a very clear direction of causation: happier staff cause customers to be happier by treating them better. However, Chun’s findings suggest we open our minds to other possibilities.

If there is a correlation, the arrow of causation might flow in the opposite direction: experiencing happy, satisfied customers may make staff happier in their jobs. Or perhaps in some situations there’s a completely different dynamic at work: customers are happy because the company’s management have instilled the fear of God into their staff, who feel impelled to run that extra mile for customers… or else.

Or perhaps there are other “third party” influences at work. Chun’s research doesn’t factor in degrees of company success for example. But some research suggests that companies that are commercially successful tend to have happier staff, simply because most employees prefer working for successful companies rather than unsuccessful companies.

Given these possibilities “it might be dangerous for managers in a service business to adopt the Service Profit Chain model as a strategic tool without being flexible about their own situation and type of business,” Chun told the conference.

The Service Profit Chain is also linked (though vaguely) to another bandwagon: “internal branding” and “living the brand”. You can see the logic. If a good proportion of the total value generated by the brand comes via customers’ experience of dealing with staff (either in a call centre or face to face) then it’s much better that staff implement brand promises by being (say) friendly and helpful rather than being surly and unhelpful. Clearly then, the company needs to work hard at recruiting, training and motivating staff to behave in ways that deliver the brand promise.

At another level, however, “living the brand” can have a touch of the totalitarian about it. For employees, fulfiling a job description isn’t enough any more. Now the corporation wants to control their thoughts and feelings – their very lives – too. Thus many “live the brand” programmes introduce all manner of “brainwashing” under the guise of internal branding and “culture change” while pushing rewards and incentives into new and inappropriate areas of employee behaviour, such as “helpfulness” or “cheerfulness”. The net result can be a resurgence of discredited command-and-control styles of management, just as the rest of the organisation tries to wean itself off them.

What’s the problem here? Well, there’s a few. For a start, such programmes make the bold assumption that centrally inspired head office initiatives can change the way staff think, feel and behave on the ground. Chun’s research questions this assumption. Yes, the grocery retailer with a positive correlation between staff happiness and customer happiness has strong, centralised personnel policies and a strong corporate culture. But there is still a wide divergence in performance between stores within the same company. The real influence on staff happiness, it appears, isn’t stuff decided in head office but the personalities and skills of local store managers. If you are looking for cause and effect, then, it may be better to look to “people” rather than “policies”.

There’s also growing evidence that if you give people extrinsic rewards or incentives for tasks they previously undertook for their intrinsic value (simply because it is was worth it, in its own right) the value of that task is degraded in their eyes and “performance” declines. You then get sucked into a vicious circle of ratcheting up rewards and incentives to push ever more instrumentally minded people into doing things they were previously very happy to do for free.

If that’s the case, then you need to approach things very differently. Take Toyota. Its philosophy is that you don’t go to work to do a job; you go to work to learn how to do the job of serving customers better. Instead of prodding and poking employees into behaviours top management want, it is top management’s job to help employees in this quest for learning and improvement. If you clear internally generated barriers away, people’s natural talent and creativity just flows. This philosophy was tested when Toyota took over General Motors’ Fremont plant in California in the early 1980s. The plant’s productivity, quality and labour relations were diabolical. But within two years, quality defects had been slashed twelvefold, absenteeism was down from 20% to 3%, and productivity had doubled – all with the same workforce.

Which raises the question, do you need to motivate staff in order to get them to serve customers better, or does improved staff motivation emerge as a by-product of helping staff serve customers better? A positive correlation between staff happiness and customer happiness would be nice. Chun’s research is a timely reminder that assuming something is very different to knowing how to achieve it.

Alan Mitchell, www.alanmitchell.biz