Shareholders or Customers or Employees - Who Drives Decision-Making?

Updated: June 08, 2011

Despite the title of this book, I noticed that the author consistently referenced distinct customer needs that spawned new thinking about employee empowerment and the needed shifts in internal processes and policies to enable employees across the company (not just customer service employees) to really serve customers properly, whatever their role. Another clarification:

"The value zone of industrial companies is deep inside the organization, in the R&D centers and the manufacturing plants. ... The rise of the knowledge economy, however, has changed all that. ... The value zone no longer lays in the technology itself and certainly not in any particular hardware or software technology. Customers could choose among many options, all of which would likely enable them to achieve their goals if implemented well. Something had to be different, then, about the way the technologies were brought together and implemented for each customer. Something more had to be changed about how we delivered our services."

(I recommend reading this book as a great primer for modern thinking and pragmatic methods of customer-centric employee empowerment and engagement.)

Employees First

This provocative question "Customers 1st or Employees 1st?" was posted on several LinkedIn Groups to gauge prevailing opinions. Those working in service industries or customer service functions leaned toward employees first:

  • Your customers will only be happy if the people servicing your customers are happy. (1)
  • Employees are the key touch-points to know the customer better so an organization can develop and deliver products and services that are relevant to customers' needs and expectations. (2)
  • Great employee engagement will not guarantee customer engagement, however, poor employee engagement guarantees poor customer engagement. (3)

Customers First

Acknowledgement of customers' life-giving value to an organization expanded to a discussion of customer definition:

  • It is a buyers' market and each customer is critical to the success of the business. Without customers there is no need for employees. (I see no indication that the public sector seems to view the customer as critical.) (4)
  • A customer-centric focus is a part of the culture driven by leadership; it defines how employees behave, imparts certain values, and influences their decisions. (5)
  • Any employee within an organization is a customer to another employee, one way or another, but that does not generate the revenue. If the end-customer objectives are clear to the organization, and the roles of each employee relative to these objectives are clear - 'we exist because of the end-customer' -- we can get our act together to satisfy the end-customer. (6)
  • Everyone is a customer to someone. The employees are the customer themselves for benefits, safety, ergonomics, etc. The direct opposite is true when considering quality, productivity, etc, where the organization is the customer of the employee. Bottom line, when everyone views the recipient of their actions as the ‘customer', the whole employee / customer question becomes moot. (4)

Two Sides of the Same Coin

  • Different sides of the same coin. Both have to be in balance to each other. All employees in the organization should be committed to contributing to customer satisfaction and own their piece of the customer experience. It will reflect in the perfectness of the product. Both need to be heard and respected to make it a win-win. (7)
  • Consider the employee as an internal customer and the answer is clear -- they both matter equally. They are part of an inseparable circuit. (8)
  • I find this question rather tricky, like asking 'heart first or lungs first?' You can't live if any of these stop working. (9)
  • If approached as mutually exclusive efforts, you are doomed to lose both. (10)
  • If the culture of the organization puts the customer at the heart of the business, that will drive employee behavior. (11)
  • You need leadership focus and strategy as well as the right organizational alignment, along with employee engagement, to give yourself the best opportunity for a great customer experience. (12) 

What's the Reality?

Impressive discussion, but what really happens in day-to-day management? When I expanded the question to ask how investors figure into the equation, people responded that theoretically all stakeholders' needs should be balanced, but they acknowledged that's rare in actual practice.

  • What does it mean to ‘come first'? Shareholders get number one favor and priority. (13)
  • Traditionally, the dominant mindset for public companies has been one of fine-tuning corporate operations to meet Wall Street financial targets, e.g. growth in stock price (however achieved), earnings per share, etc. (14)
  • There is no equal importance of all in reality, and therefore, a client needs consultants to fix the problems :). Silos occur when a function does not care about their end-user but only their own performance metrics. (15)
  • There's also the Board as well as shareholders to consider. Not too long ago we did a piece of work for a major UK retailer whose Chief Exec was rewarded by driving up profit and share value. He did so using the 'pile them high, sell them cheap' mentality whilst sacrificing all the good things they'd done around creating a great customer experience. So when he left with his big payout there was little in the way of customer loyalty left - inevitably they were bought by another company! (16)

Aligning Interests of All Stakeholder Groups

Thank goodness some companies have figured out how to "actively align the interests of all stakeholder groups (society, partners, investors, customers, employees), not just balance them," explains the authors of book Firms of Endearment: How World-Class Companies Profit from Passion & Purpose. "Instead of trading off the interests of one group versus those of another, they have carefully devised business models in which the objectives of each stakeholder can be met simultaneously and are in fact strengthened by other stakeholders. That's why these companies can do seemingly contractor things such as pay high wages, charge low prices, and get higher profitability." Companies classified as ‘firms of endearment' include Amazon, BMW, CarMax, Caterpillar, Commerce Bank, and 22 others (see pages 9-16). "The public ‘firms of endearment' returned 1,020 percent for investors over the 10 years ending June 30, 2006, compared to 122 percent for the S&P 500. … Over a 10-year horizon ‘firms of endearment' outperformed ‘Good to Great' companies by 1,026 percent to 331 percent (a 3-to-1 ratio).

Practical advice for stakeholder alignment is provided in the book Chief Customer Officer: Getting Past Lip Service to Passionate Action. Every company has a traditional power core - engineering, sales, IT, marketing, etc. - and author Jeanne Bliss explains how to diagnose the power core and address the realities of that core's inherent strengths and weaknesses to achieve stronger customer experience and business results simultaneously. Overcoming silo mentality through transparent metrics and effective motivation techniques is essential for any organization's long-term value maximization, for every stakeholder.

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