Article -> Make the Connection: Aligning Employee Actions with Customer Loyalty
Date Added: August 2006
A main stimulus behind strategy is a business goal to meet the needs and expectations of customers and other key stakeholders. Financial results are primarily used to measure the effectiveness of strategic initiatives, but these results are not the only drivers of business success. A connection needs to be made between day-to-day relationships among people and customers, and with your financial results.
Marketing leaders are often held accountable for developing a customer loyalty strategy; however, other leaders are often disconnected from this strategy. Employees need to become indoctrinated with corporate level measures in order for strategic goals to be met. The question is simple: Do you want 10% of your employees working toward the company’s customer loyalty objectives − or 100%?
Comprehensive performance measurement systems can be developed to replace current key performance indicators that emphasize short-term results and lack long-term strategic focus. Performance measurement systems include measures of operational, strategic, sales, marketing and other non-financial performance at multiple points along your value chain.
Benefits of using a performance measurement systems include:
- Aligning strategic insights to financial results.
- Improving “line of sight” strategies to achieve desired performance.
- Communicating with all employees.
- Motivating employees and showing how actions affect outcomes.
- Enhancing the implementation/acceptance of your strategy.
A key feature of performance measurement systems is their ability to provide reliable predictions of outcomes based on cause-and effect relationships. Testing these “causal relationships” offers high returns. A study reported that only 23% of organizations consistently built and tested causal models and systems, but this percentage, on average, achieved 2.95% higher return on assets and 5.14% higher return on equity.1
Performance measurement systems are excellent tools to tell the story of how organizations can succeed by managing intermediate activities. The question of whether customer loyalty can be affected is answered by statistical correlations, showing relation between operational metrics and strategic metrics.
For example, while software programmers might be accustomed to tracking metrics such as number of program bugs fixed, they can understand their roles in customer loyalty strategy if they see those same metrics aligned with tactical customer loyalty drivers (i.e. customers’ perceptions of reliable software).
Customer loyalty strategy should be incorporated into performance measures that are strategic by using causal relations to show a clear line of sight from day-to-day actions of people to customer loyalty and financial results. This communicates strategy to all people resulting in greater productivity and profitability for your organization.
1 Crosby, Lawrence and Sheree Johnson. “Cause and Effect.” Marketing Management. May/June 2006: 12-13.