CASE STUDY

Putting the customer second

Ronald J. Burke, James Graham and Frank J. Smith
York University, Toronto, Canada
Abstract
Purpose Two studies examined the relationship between employee satisfaction and customer
satisfaction in two service organizations.
Design/methodology/approach Employee satisfaction and customer satisfaction data were
gathered separately and aggregated to branch or store level measures.
Findings The data indicated generally positive and statistically signicant relationships between
employee satisfaction and customer satisfaction. Customers reported greater service satisfaction with
branches or stores whose employees indicated higher levels of work and employees satisfaction.
Originality/value Implications for the delivery of high quality customer service are offered.
Keywords Customer service management, Customer satisfaction, Employees
Paper type Case study
Structural changes in the North American economy during the past two decades have
resulted in increases in the size and importance of the service sector (Albrecht and
Zemke, 1985). The service sector now accounts for almost three quarters of GDP, about
three-quarters of current employment and will account for a disproportionate share of
future job growth. These changes, coupled with increased foreign competition and
greater customer demand for higher quality service and products, have forced
organizations to examine present levels of service they provide to clients and increase
quality of service if required (Berry et al., 1990; Henkoff, 1994).
Providing a service is fundamentally different from manufacturing a product. When
an individual purchases a refrigerator, for example, he or she has no contact with those
individuals who manufactured the product. The consumer may have some
expectations about the product based on advertising, word of mouth or previous
ownership of the product, and develop some feelings about the quality of the product
after some experience with it, but these perceptions of product quality are not
inuenced by personal contact with those individuals who manufactured the product.
When individuals purchase a service, however, they are inuenced by the service
provider and the quality of the experience or encounter they have with the service
provider. The provision of service is face-to-face; the receipt of service is both a
personal and a psychological experience. There is a psychological and a physical
closeness between service providers or employees and customers in the service
encounter (Schneider, 1990a, b; Schneider and Bowen, 1985, 1993).
In addition, there is no quality control in the customer contact. If the transaction is done
poorly, the organization ends up with a dissatised customer. And such customers may
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
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Preparation of this manuscript was supported in part by Organizational Studies International
Inc. and the School of Business, York University. We acknowledge the cooperation of the two
organizations in collecting the data. Louise Coutu prepared the manuscript; Cobi Wolpin assisted
with data analysis.
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customer second
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The TQM Magazine
Vol. 17 No. 1, 2005
pp. 85-91
qEmerald Group Publishing Limited
0954-478X
DOI 10.1108/09544780510573075
not only take their business elsewhere but also share their negative experiences with
others. This relates to the increased attention services rms have devoted to understanding
how they might attract customers, coupled with recent interest in how rms might retain
customers once they have been attracted to them. Customers are reactive. They are
inuenced by the service provider and the quality of the experience they receive.
Customers who are more satised with the service they receive are more likely to remain
loyal to the organization. Conventional marketing wisdom advocates putting the customer
rst; we suggest as the title indicates putting the customer second.
There are two major ways in which rms can increase the service satisfaction of
customers. The rst involves human resource management practices leading to high
levels of employee satisfaction or morale (Batt, 2002). The logic behind this is fairly
straightforward. Employees generally self-select into service occupations because they
want to use their skills and aptitudes in delivering a high quality service to customers.
When they are able, rewarded and supported in doing so, this realization will be
associated with the belief that they are in fact providing a high quality service to their
customers. In addition employee satisfaction or morale will also directly translate into
higher levels of customer satisfaction with the service experience. Employees will be
more enthusiastic and positive during the service encounter. The positive climate of the
organization will be exposed to the customer through higher levels of employee
satisfaction (Uhlrich et al., 1991). For many customers, the employees are the
organization (Barlow and Mail, 2000).
The second involves the development of organizational values, policies and
procedures which support the delivery of high quality service to clients (Dennison,
1990). Evidence froma variety of sources (see Schneider and Bowen, 1995, for a review)
shows that when employees work for an organization they believe values the delivery
of high quality service, customers report that they receive high quality service.
Burke (1995) found that employees reporting greater job and supervisor satisfaction
also rated the quality of the rms products and services more highly. More satised
employees believed they and the rm were delivering a higher quality of service
relative to their competitors. And not surprisingly employees who identied higher levels
of support for quality service, and fewer barriers to quality service, rated the quality of the
rms products and services more favorably compared to their major competitors.
It is important to understand howservice employees feel about the quality of service
they provide to clients since previous research has shown that these assessments are
signicantly related to independently obtained ratings from clients about the quality of
service they receive. That is, when employees think they are providing good (or bad)
service, clients agree (Schneider et al., 1980).
In addition, there is accumulating evidence that client perceptions of service quality
are related to long-term rm protability. Bernhardt et al. (1994), in a study of
protability among 472 restaurants, reported that customer satisfaction data collected
at any point in time were related to restaurant prots nine months later. Similarly,
Anderson et al. (1993), in a study of a diverse group of 77 rms, observed that customer
perceptions of quality were positively related to ROI.
Two studies examining the relationship of employee satisfaction and customer
satisfaction are reported here. In these studies, employee satisfaction is the
independent variable and customer satisfaction is the dependent variable. In both,
employee and customer satisfaction were obtained separately and aggregated to
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branch and store level measures. Do customers report greater satisfaction with service
quality when employees indicate higher levels of work satisfaction?
Organization A
Organization A is a large Canadian rm in the nancial services sector. The research
was undertaken in 130 of their branch ofces, with the data being collected in 1994.
This rm measures employee morale in about one-third of its branches on a regular
basis, so the 130 branches represent the total population considered at this particular
time. Employee morale was measured by a standardized and widely used instrument
called the Index of Organizational Reactions (IOR). The IOR contains 42 items which
measure eight aspects of job satisfaction (Dunham et al., 1979). These were:
(1) leadership and direction;
(2) work appeal;
(3) work demands;
(4) teamwork;
(5) physical surroundings;
(6) nancial rewards;
(7) career future and security; and
(8) organizational commitment.
These eight scales were found to have good convergent and discriminate validity and
reliability. In addition to these eight job satisfaction factors, a ninth measure, termed
the Alienation Index, based on a subset of 14 items from the initial eight satisfaction
factors was available.
The eight job satisfaction measures were signicantly and positively
intercorrelated (n 28), correlations ranging from 0.24 to 0.74. Branch employees
more satised on one satisfaction factor were also more likely to be satised on the
other job satisfaction factor.
Customer satisfaction levels were measured by means of a mechanical device
located in each branch location for a specied period. Twelve aspects of customer
satisfaction were considered using single item measures. These included:
.
making you feel they want your business;
.
condent that problems will be taken care of;
.
identifying customer needs and offering solutions;
.
staff knowledge;
.
staff friendliness; and
.
staff speed in providing service.
These 12 aspects were combined into an overall measure of branch satisfaction since
they were signicantly and positively intercorrelated. That is, customers more
satised with a particular aspect of service in a branch were also more likely to be
satised with other aspects of service provided by the branch. Branch-level scores were
developed based on the average satisfaction of all employees in a branch completing
the IOR and the average customer satisfaction with a branch based on those customers
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completing the in-branch survey. We then examined the correlations between these
two independently obtained measure of satisfaction.
The 12 customer satisfaction measures were all positive and generally signicantly
different from zero (62 of 66, 93 per cent), correlations ranging from 0.16 to 0.94.
The results are shown in Table I. Four of the eight scales of the IOR produced
signicant correlations with the aggregate measure of customer satisfaction. The
Alienation Index, based on a sub-set of items from the eight original IOR scales, was
also signicantly correlated with average customer satisfaction. In each of these cases,
levels of employee satisfaction in a branch were related to levels of customer
satisfaction with these branches. These data show a strong relationship between the
morale of employees in a branch and the level of service customers report receiving
from that branch. And some elements of morale had a more salient role in predicting
customer satisfaction than did others.
Organization B
Organization B is part of an international retail rm with over 800 stores or operations
worldwide. These stores operate relatively independently, selling a variety of
consumer products including clothes, tools, appliances and automotive services. This
study was carried out in 1994 in a representative sample of 44 stores in the Canadian
operation.
Employee job satisfaction was again measured by the IOR. A total of 2,302
employees of the rm completed the IOR across the 40 stores. Customer satisfaction
was measured by a series of 150 interviews carried out in each store by an independent
research organization. Customers indicated their satisfaction with service in a given
store in 14 categories. These categories are listed in Table II. The extent and depth of
these interviews made for an unusually comprehensive and reliable measure of
customer satisfaction.
The eight job satisfaction measures were positively and generally signicantly
different from zero (34 of 36, 94 per cent). Correlations ranged from 0.27 to 0.90
(n 44). The 14 customer satisfaction items were positively and generally
signicantly different from zero (81 of 91, 89 per cent), correlations ranged from 0.06
to 0.94 (n 44).
To simplify the analysis and reporting of ndings, the results using only one
measure of employee morale, the 14 item scale labelled the Alienation Index, will be
Average branch satisfaction Average customer satisfaction
Alienation Index 0.19*
Leadership and direction 0.12
Work appeal 0.29**
Work demands 0.30**
Teamwork 0.08
Physical surroundings 0.01
Career future and security 0.07
Financial rewards 0.25**
Organizational commitment 0.21**
Notes: * p , 0:05; ** p , 0:001; n 130 branches
Table I.
Correlations between
employee satisfaction and
customer satisfaction
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presented. The predictive validity of this measure has been demonstrated over a 20
year period.
Half the correlations were signicantly different from zero. Stores whose employees
reported higher morale (scoring lower on the Alienation Index) also had customers who
experienced greater satisfaction with most facets of customer service.
A distinction was then made among the 14 customer satisfaction categories. This
was accomplished by having two store executives estimate the degree of employee
control over, or inuence on, each customer satisfaction category. For example, such
things as credit accuracy and promptness were controlled by centralized credit centers
which serve all stores and as a result were completely independent of store employees.
Similarly a stores in-stock condition was largely controlled by store management and
the companys centralized buying and distribution practices. It was only marginally
inuenced by employees who might, for example, suggest substitutes for an
out-of-stock item. The results showed a clear and highly signicant relationship
between employee morale scores as reected in the Alienation Index and all measures
of customer satisfaction on which employees had an inuence, while showing
zero-order and statistically insignicant correlations with those customer satisfaction
measures on which employees had little or no inuence. While correlation does not
prove causation the nature of the data collection and the pattern of ndings reduces the
likelihood, that customer satisfaction causes employee satisfaction, though the two are
obviously correlated.
Discussion
Implications for service organizations
What should management do to meet customer needs for high quality service? Our
research and consulting work, along with recent writing in this area (Schneider and
Bowen, 1995), indicates that organizations must develop two distinct, but related
climates a service quality climate and a human resource management climate.
Organizations can only manage service quality through organizational climate since
managers cannot be present during every interaction.
Customer service categories Alienation index
1. Allowing customers to pay for merchandise quickly 0.45**
2. Short waiting times at cash register 0.50**
3. Having salespeople with good product knowledge 0.44**
4. Getting problems solved quickly 0.38**
5. Having good sales 0.31**
6. Smiling and being friendly 0.30**
7. Trying hard to satisfy customers 0.18
8. Being clean, neat and well-organized 0.19
9. Having merchandise in-stock 0.12
10. Standing behind its merchandise 20.07
11. Making it easy to use a credit card 20.12
12. Promptly crediting customers account 20.20
13. Having a no-hassle return policy 20.24
14. Accurate credit account statements 20.30*
Notes: * p , 0:05; ** p , 0:001; n 44 stores
Table II.
Correlations between
alienation index and
customer satisfaction
Putting the
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89
Developing a service quality climate
This aspect of climate involves the development of organizational policies and
procedures that support and reward employee behaviors associated with the delivery
of high quality services to clients. Specic initiatives would include:
.
having available the required supplies, equipment and machinery to deliver
quality service;
.
encouraging employee behaviors demonstrating the importance of customers,
and their retention;
.
managerial behaviors such as planning organizing and managing service
through the use of denite quality standards of good customer services; and
.
providing adequate staff (numbers, skills) to support quality service.
Developing a human resource management climate
This aspect of organizational climate involves human resource management practices
which lead to high employee satisfaction or morale. How can rms create positive work
experiences for their employees?
The following human resource management practices have been found to be
important in this regard:
.
hiring staff that are right for service jobs;
.
providing orientation, training and socialization experiences to help newcomers
get started;
.
providing information and counselling to employees in support of career growth
and development;
.
rewarding supervisor behaviors such as providing feedback, sharing
information and rewarding good behavior via praise and performance
appraisal; and
.
reducing stress experienced by staff at the boundary between managers and
customers.
It is important that both climates exist for all members of the rm, not only those
having front-line service delivery responsibilities. The delivery of high quality services
starts at the top levels. And as Henkoff (1994) succinctly put it: You cannot expect
your employee to delight your customers unless you as an employer delight your
employees. His specic advice is equally straight-forward and consistent with putting
customers second and employees rst:
.
hire nice people;
.
treat them well;
.
encourage them to bind emotionally with the company;
.
train them continuously; and
.
equip them with the best technology.
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