You cannot expect customers to love your company before your employees do. Do happy employees and customers translate to accelerated growth? What exactly is the experience equation as it relates to growth? For a long time, we have all read and heard about the link between stakeholder experience and revenue growth.
To better understand the relationship between employee experience (EX), customer experience (CX), and revenue growth, Forbes Insights used publicly available data and conducted research that included an executive survey of more than 300 EX and CX leaders. Survey respondents were US-based executives across a range of sectors. Seventy-eight percent of respondents are members of the C-suite and included titles such as chief people officer, chief employee experience officer, chief human resources officer, chief customer officer, chief marketing officer, and chief sales officer. All executives represent organizations with a minimum of $20 million in annual revenue, with 66% representing firms of more than $500 million in annual revenue.
Here are the key findings of the research:
- Revenue growth is linked to high EX, regardless of CX prioritization. Companies that have both high EX and CX see almost double the revenue growth as those that do not.
- Seventy percent of executives agree that improved EX leads to improved CX, which in turn leads to rapid revenue growth.
- Fifty-two percent of executives disagree that fast revenue growth leads to high EX. There is no "virtuous circle."
- EX and CX leaders disagree on the biggest obstacle to improving CX and EX. Forty-one percent of CX leaders say the main problem is a lack of shared senior management vision. Forty-three percent of EX leaders say employees are resisting cultural change.
- Forty percent of executives say that creating teams that combine EX and CX skills is the best way to overcome cultural obstacles.
Here are additional key findings of the research:
- Great employee and customer experience boosts revenue. Growing companies focus on both employee and customer experience. Seventy-six percent of revenue growth leaders rank EX as top priority in the next three years as compared to 29% of the laggards. Eighty-nine percent of revenue growth leaders say EX leads directly to improved CX. There is aa 1.8X faster revenue growth at companies with high CX and EX versus low CX and EX.
2. EX -> CX -> revenue growth. So to drive expansion, a company should begin with EX. Seventy percent of executives agree that improved EX leads directly to improved CX. Eighty-nine percent of executives at companies that consider themselves revenue-growth leaders agree that better EX leads directly to better CX. This EX -> CX transmission equation can deliver a number of benefits in addition to fast growth. Among them are:
- Stronger employee and customer loyalty
- A workforce more open to technological change
- A better organizational capacity for transformation
- Closer alignment with business goals
3. Revenue growth does not guarantee happy employees. Only 30% of executives said that growth leads to better EX. The research highlighted specific case studies that showed company growth does have limits in terms of EX.
4. Organizational design must enhance both CX and EX. Executives say the best way to make CX and EX contribute to revenue growth is by shaping operations strategy to enhance CX. Executives at companies that consider themselves EX leaders particularly emphasize this alignment: 66% of them focus on it, while only 43% of executives at companies with average or below-average EX do. Ultimately, like any other business initiative, the purpose of great employee and customer experience is to drive growth.
Structuring incentives around CX and EX will improve both. The survey suggests a couple of ways to improve both CX and EX. One way involves improving governance by incentivizing employees and fully investing them in the success of the company. Some 46% of CX leaders' executives emphasize structuring incentives around CX/EX, compared with only 35% of average and below-average CX executives.
5. CX and EX decision-makers have different priorities. EX executives and CX executives need to march in lockstep at fast-growing companies. The biggest obstacle for improving CX and EX for EX executives was employee resistance to cultural transformation. For CX executives, it was lack of senior management vision. EX execs and CX execs also have divergent views about how to confront the EX/CX challenge. EX leaders (39%) say that senior management must instill a vision for change to best improve EX and CX. CX leaders (47%) say that organizations must be redesigned to focus on high CX and EX as the best way to improve.
To build greater alignment, I believe both CX and EX leaders must define their company's core values and guiding principles. These leaders need what we use at Salesforce: A V2MOM process for alignment: Vision, Values, Methods, Obstacles, and Measures.
6. The COVID-19 pandemic has led to EX and CX becoming a strategic imperative. "The most dramatic of these changes has been the COVID-19 pandemic, which is shifting priorities. Almost half (47%) of the executives surveyed say that COVID-19 is stimulating them to fundamentally rethink the way they create customer experiences. Enhancing CX will represent one of the biggest challenges going forward," according to the report. Sixty-five percent of executives say CX will be among the top five priorities for the next three years. Forty-seven percent of executives say EX will in their top five priorities.
EX executives say that CX will be the most important objective or among their top five objectives by a wide margin over CX executives (81% vs. 64%). For CX executives, the priorities are reversed: 68% say EX will be the most important objective or among the top five objectives, compared with 52% of EX executives.
According to the latest Salesforce State of Connected Customer Report, CX is as important as the products and services that companies produce." A company that shows genuine concern for both its employees and its customers, while remaining efficient and effective, is likely to see that high EX -> high CX -> high revenue growth," according to the research findings.
7. Strong leaders at small companies drive fast growth. The research found that high-growth small companies earn better employee ratings than mature companies. The research found that empathic leadership and a strong team ethos can create a situation where explosive demand actually deepens employee engagement. To sustain high growth, decision-makers must create an environment where employees can blossom along with the company.
8. Four steps for improving EX and CX:
- Align your company with strong leadership and vision. More than a third (36%) of executives say there's too much resistance to cultural change among employees. Leaders must establish and communicate a clear vision and purpose in order to realize EX and CX improvements.
- Align operational and IT strategy to focus on CX. Nearly half of the surveyed executives claim that the pandemic is leading to a fundamental reassessment of how to enhance customer experience.
- Incentivize cross-functional teams to enhance both CX and EX. The biggest organizational obstacle to improving CX and EX emerges when a company emphasizes one or the other or puts conflicting priorities in place.
- Invest in technologies to measure CX and EX. The average organization has 900 applications, and only 28% are currently integrated.6 Companies are still operating in silos and making investments that are not necessarily crucial to employees' day-to-day work.
In summary, it is important to understand the experience equation:
Happy Employees + Happy Customers = Accelerated Growth.
To learn more about the experience equation and the research, visit here.