The rise of employee experience: employees as the new customers
For years companies have focused on the customer experience as the primary driver of business success, but in recent times the conversation has shifted. Increasingly we are seeing the employee experience taking the limelight as companies start to see the value of investing in their people first. According to one study by The Economist Intelligence Unit, 81% of the global firms they interviewed reported employee experience as a dominant topic of discussion amongst leadership. So, what is employee experience, and why does it matter?
What is employee experience?
Employee experience (EX) is another one of those modern phenomena; an idea that has sprung into existence in response to emerging market trends. In order of significance:
- The need to attract and retain talent in the face of a limited supply
- The need to engage that talent to maximize productivity and accelerate growth
- The need to be socially responsible and support well-being in the workforce
The concept was arguably born (or at least actualized) at the AirBnB headquarters in 2016, when the company created the first department specifically designed to tackle employee engagement. Now AirBnB ranks 6th in the Employee Experience Index, amongst the likes of Google and Facebook, and is currently valued at $31 billion after just 10 years on the scene. AirBnB is an unequivocal employee experience success story, so how did they do it?
AirBnB’s conceptualization of employee experience (and the one we rely on today) builds upon an existing body of research surrounding customer experience (CX). Customer experience is the sum of all experiences a customer has with a company. It includes everything from the first time they saw the company advertised to the recommendation they received from their friend, all the way through to the purchasing experience and beyond. Every interaction a customer has with a company makes up part of their overall experience.
Businesses care about customer experience because it’s a powerful indicator of future success, dictating how likely a customer is to repurchase or recommend its goods or services to a friend. But, as many important things are, it is complex. Customer experience can be difficult to measure and even more difficult to tackle. CX takes into account all of the many touchpoints a company has with its customers, many of which (like recommendations from a friend) is outside a business’ immediate control. The same is true of the employee experience.
Employee experience follows the same principles as CX. By taking a granular look at all of the interactions experienced by employees at every stage of the journey or lifecycle, we can more effectively engage the workforce. More than a matter of culture or satisfaction, employee experience is about all the many components that add up to form a person’s perception of the company they work for. But why does it matter?
Why does employee experience matter?
It’s easy to see why a customer’s impression of a company is important – if the customer isn’t happy with a service, they’re unlikely to come back. If this happens on a large scale, it’s hardly a recipe for growth. When it comes to employee perceptions and their impact on growth, the relationship is less obvious. So why would companies be investing millions into improving employee experiences?
Here are some facts to shed some light on why employee experience matters:
#1. Good employee experience reduces employee turnover
- 89% of employers think employees leave for more money but in reality, only 12% do. (Gallup)
- Highly engaged employees are 87% less likely to leave their companies than their less engaged counterparts. (Corporate Leadership Council)
- Of employees ranked within the lowest 25% in terms of EX, 44% express intent to leave their workplace (IBM Analytics)
- $11 Billion is lost annually due to employee turnover (Bureau of National Affairs)
High employee turnover can cripple a company. The costs of hiring, on-boarding and further training are significant, and when that employee leaves after a short tenure, the effects can be devastating. Not just in terms of monetary losses - impact on culture can be just as damning. Investing in employee experience is one way of keeping employees for longer and avoiding the impact of repetitive disruption.
#2. Happy (engaged) employees are more productive (and innovative)
- Teams with high employee engagement rates are 21% more productive (Gallup)
- Happy employees are 12% more productive (Warwick University)
- Unhappy employees undermine the good work of those that are happy (Alight Solutions)
- The heaviest investors in EX are 28x more often listed among Fast Company’s Most Innovative Companies (Harvard Business Review)
- They are also listed 2.1x as often on the Forbes list of the World’s Most Innovative Companies (Harvard Business Review)
The research showing low engagement = low productivity is extensive. There is little denying that engaged employees are a company's most valuable asset. Fueling engagement means providing employees with a working environment that allows them to operate at their best. This means supplying the right technology, fostering a positive culture and providing an environment that suits employees working style. When you get these three elements right, the stats speak for themselves: employees work harder and innovate faster.
#3. The better the employee experience, the better talent you attract (and keep)
- The heaviest investors in EX are 5x more likely to appear in Glassdoor’s Best Places to Work (Harvard Business Review)
- They are also 4.4x more often included in LinkedIn’s list of North America’s Most In-Demand Employers (Harvard Business Review)
Attracting talent is top priority for most companies who face a dwindling pool of bright sparks. There's a global skills shortage affecting a cross-section of industries, which means employees can be fussier about where they're willing to work. More than ever, companies are competing against each other to attract the best talent and the battle is often won on employee experience.
#4. Good employee experience equals better customer experience
- Companies with “great employee experience” have higher levels of customer satisfaction. Employees were found to be more innovative and proactive, which translated into better products and service. (MIT Sloan Center)
- The heaviest investors in EX are twice as often found in the American Customer Satisfaction Index (Harvard Business Review)
- Companies that focus on improving the employee experience report better customer experiences (The Economist Intelligence Unit)
When your employees are engaged in their work and happy with their jobs, customers notice. Instead of half-hearted responses and minimal-effort approaches, employees that take pride in their work are willing to go the extra mile for your customers. Give to them, and they will give to you.
#5. Good employee experience leads to bigger profits
- Companies that invest in EX outperform the ones that don’t by 2x in terms of average profit (Harvard Business Review)
- Companies with engaged employees have 5x the revenue when compared to competitors with low engagement levels (Hay Group)
Ultimately, good employee experience = money. When you add up the factors above - improved productivity, customer service, better talent, less disruption - it's not hard to see how investing in employee experience generates strong returns. The facts are the facts: the more effort you put into your employees, the more value they will give you in return.
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