Listen to Your Employees, Not Just Your Customers

Listen to Your Employees, Not Just Your Customers

by Beth Benjamin
Harvard Business Review https://hbr.org/2016/08/listen-to-your-employees-not-just-your-customers
August 15, 2016

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In 2014, Michael Callahan, then head of customer experience at Hulu, had a mystery on his hands. When the big video streaming service surveyed customers who renewed subscriptions, it discovered, paradoxically, that some customers stayed with Hulu even when they didn’t necessarily have a positive perception of the brand overall.

It turned out that some customer service representatives of the third-largest player in the streaming video space were pushing fence-sitting customers too hard, said Callahan in a recent interview. Paid digital TV companies, which also include Netflix and Amazon Prime, face high churn. Like Hulu, they need to ensure positive perceptions among customers routinely up for grabs between the big players.

“We had a gut-check conversation to discover what it meant to truly serve customers,” Callahan remembers. “We wanted employees to act more authentically to achieve a better, more positive experience of the brand overall. We didn’t want them only thinking about retention.”

That’s when Callahan’s team took an unusual step: The team created and linked an employee feedback system to its customer feedback system, in order to flag interactions where customers and employees had different perceptions. The linked system consisted of two short surveys — one sent to employees and the other to customers — right after a transaction. The linked system allowed for more insight into customers, and managers could use the information to coach employees, to assess whether they had the right tools and resources, and to identify people with innovative ideas and leadership potential.

Many companies love customer feedback, but only a handful have devoted as much energy to employee feedback systems. “For every dollar spent on employee feedback, companies spend hundreds of dollars on customer feedback,” said Troy Stevenson, former vice president of customer loyalty at eBay, in a recent interview.

Companies rarely connect the two systems. But, connecting them can create powerful feedback loops that engage employees and help companies adapt to fast-changing customer expectations, according to new research I conducted with my colleagues Carolyn Egelman, Julia Markish, Emma Sopadjieva, and Dorian Stone at the Medallia Institute. The research included interviews with more than 25 customer experience and HR executives and a survey of 1,000 frontline employees working at large companies in the U.S. automotive, financial services, retail, telecomm, and hospitality sectors.

Linking feedback systems allows companies to enlist frontline employees as agents of change. In our Medallia Institute survey, 56% of frontline employees said they have suggestions for improving company practices, and 43% said their insights could reduce company costs. Yet, a third said they were surveyed once a year or less, and more than half said employers weren’t asking the right questions.

In the case Callahan described, two screen pop-up surveys were sent to customers and employees immediately following a customer service transaction.

Customers were asked:
•Was your problem solved?
•Are we easy to work with?
•Did you enjoy the experience you just had?

Employees were asked:

•Did you solve the problem?
•Was it easy to access the tools and resources you needed to solve the problem?
•Did you feel proud to represent our brand in the conversation?

The linked feedback system prompted executives to adjust the compensation plan: customer service representatives received a retention bonus only if a subscriber remained on the rolls 30 days after an interaction.

Reducing customer churn by even a small amount can add up to a lot in a subscription-based business. For example, if linked feedback loops helped to improve retention by even one percentage point, the savings on a subscriber base of 12 million (Hulu’s current base) with a typical monthly subscription price of $7.99, would generate an extra $11 million in annual revenue.

Why don’t more companies do this? Organizational barriers are often the culprit. At one 170,000-employee big box retailer, linking the feedback systems would require approvals from three different senior executives, the CMO, the chief human resources officer, and the president of retail. The only person who could drive a linked system was the CEO.

Companies that want the insights from linked systems can navigate the organizational complexities with these six steps:

Align feedback systems around high-level business objectives. Which needle do you want to move? Hulu wanted to build more authentic relationships with customers. This drove everything from its questions to how it used the data.

Design your feedback system to aggregate data at key touchpoints. Most companies build separate, often expensive systems within existing reporting hierarchies. Instead, work backwards from the customer experiences you want to understand. For example, if your customer feedback is organized around touchpoints within lines of business, survey employees who interact with customers at those same touchpoints, such as a call center conversation or an account signup. Companies often make the mistake of organizing customer feedback systems around one structure — say lines of business or channel — and employee feedback systems around another — say geography or function.

Establish the right frequency and pacing for employee and customer surveys. Many companies, including Nordstrom, Four Seasons and Vanguard, collect customer feedback on a continuous basis and distribute it in real time (Disclosure: Nordstrom, Four Seasons, and Vanguard are all clients of Medallia). Most executives I interviewed said employees should be surveyed more than once a year but not more than once a month. Match the timing of your surveys to the pace at which you can act, so that you can demonstrate results. Surveying employees on a rolling basis, and using quarantine rules (designated times when you won’t ask for feedback) for customer surveys can minimize survey fatigue.

Encourage honest feedback and protect employees who answer candidly. Employees may worry their feedback will get them into trouble. Counter this perception by rewarding and honoring employees for raising difficult issues. After successes become clear, give even more recognition to employees whose feedback helped move the company forward.

Let people speak in their own words and capture emotional cues. As companies rely more on technology, relating to customers emotionally and pinpointing what troubles them gets trickier. Open-ended questions, text analytics and sentiment analysis capture interactions more vividly and compel leaders to act. “To hear an employee who’s deeply empathetic to the customer trying to explain a complex policy … to feel them struggle is painful,” says Callahan, who is now at Seattle-based Blueprint Consulting Services.

Act on the most important feedback, and communicate what you’re doing and why. In our interviews, we learned that a handful of companies are using feedback to create specific action plans tied to companies’ broader goals. At one company, executives use an internal website to post plans that grew out of employee feedback. Employees can see who’s leading an effort, view timelines, and track progress. They can also share additional feedback or volunteer for projects.

In a world where big data algorithms and technology increasingly dictate the customer experience, linked feedback systems give companies at least two great advantages. The connections help senior managers get a more complete picture of customer-employee interactions, including the behaviors — and emotions — they generate. And, asking employees for their input, not through a pro forma annual survey but as part of the company’s routine operations, sends a signal that employees have useful insights and that they are valued.

Ultimately, well-designed feedback loops enable employees to be more empowered and companies to be more responsive, creating the competitive edge companies need to adapt and thrive.

Beth Benjamin is senior director of research at Medallia, a global provider of customer experience management software. She applies organizational science to real-world problems, helping companies to adapt to the challenges of growth and market change.

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