CFOs, when well-equipped with strong leadership skills, can act as catalysts for growth for their companies and careers. However, strong leadership skills don’t just appear out of thin air – they are the result of endless cultivation, learning, and experience.
The following article is a re-post from Joe Patrnchak, Principal at Green Summit Partners, and our ‘Servant Leadership’ session speaker at The 2018 CFO Leadership Conference.
We’re thrilled to welcome him to our stage and share his innumerable insights on how this style of leadership can drive employee engagement and customer loyalty. For more information on The 2018 CFO Leadership Conference, and registration information, please go here.
Inspire Employee Engagement and Drive Customer Loyalty Through Servant Leadership
Article by Joe Patrnchak, Principal,
Green Summit Partners
Have you ever been part of an organization with a serious morale problem? If so, you know what a miserable work environment it can create. Turning that situation around is anything but easy, but as difficult a challenge as it is, it can also be a huge opportunity. Because more often than not we learn more about ourselves and our business in these very difficult situations. I know I have.
Some years back, I served as the VP of HR for Digital Equipment Corporation’s $3.5B global services division. Digital, once a technology industry leader, had missed some strategic reflection points in the marketplace and reacted ineffectively to the shift to a PC-driven, open system software environment. The result had not been pretty. Downsizing cut the workforce from 120,000 to 60,000, deep cuts were made in areas like professional development, and employee morale took a big hit.
When the new GM of the Global Services division tapped me to lead his HR organization, he put the morale problem at the top of my to-do list, and I went looking for help. That’s when I learned about the Service Profit Chain, a concept laid out in a groundbreaking article and then a book published by a team of Harvard Business School professors.
Drawing on extensive research into service-driven companies like Southwest Airlines, Taco Bell, and ServiceMaster, Professor Len Schlesinger and his co-authors linked profits and growth back through customer loyalty to employee loyalty and satisfaction. And what drives all of this? Leaders who are “caring vs removed,” who lead by “listening, coaching, and teaching vs supervising and managing,” “motivating by mission vs motivating by fear.”
So here’s how you connect the dots. Leaders who really care about their employees encourage employee satisfaction and loyalty, which drive higher performance, customer satisfaction, and customer loyalty, which in turn drive higher growth and profits.
One of the points I found then and still find most compelling about the service profit chain is the distinction it makes between customer satisfaction and customer loyalty. In this view, customer satisfaction is not an end in itself. Customers who are merely satisfied will do business with you again, but they are also highly susceptible to the appeal of your competitors. But customers who are highly satisfied—8 to 10 on a ten-point scale—these people can become loyal customers.
And here’s what’s so important about that difference. Loyal customers develop an emotional connection to a company or brand. Think Disney. Starbucks. The Ritz. Zappos. Apple. LLBean. And because of that emotional connection, according to Professor Schlesinger’s research loyal customers— compared to merely satisfied customers— are actually six times more likely to be repeat customers, refer friends, and pay more! They’ll even cut you some slack if on occasion you fail to meet your own high standards of service.
Incidentally, some people have a negative reaction to the idea of loyalty. They think of it as an outdated concept, or as some kind of mindless, emotional state—“blind loyalty”. I disagree. To my mind, there’s nothing outdated or irrelevant about the idea of loyalty. And as for its being mindless, again I disagree. Sure, loyal customers will cut you some slack, but they won’t stick with you unless you consistently deliver the kind of service that made them loyal in the first place. You can’t ever take loyalty for granted. You have to earn it and re-earn it, day in and day out.
That’s as true for employees as it is for customers. Like loyal customers, loyal employees will give you the benefit of the doubt when you make a mistake— and what leader hasn’t? And just as with customer loyalty, if you want to build a workforce that is highly engaged, loyal to the organization, and committed to its success, you need to earn that commitment every day. You do that by showing that you care.
Sometimes that takes a major new initiative. At Digital, for example, the talented engineers who worked in our services division cared a great deal about staying current in the latest technology. So our leaders worked very hard to find enough money, even in hard times, for us to make a significant investment in the kind of professional development they valued so highly.
But much of the time, it’s the small things that make the biggest difference. So leaders who care talk less and listen more. They turn the spotlight on others instead of themselves. They have the courage to get to know their employees on a personal level. They take the time to be a mentor instead of just a boss.
Remember: you can’t force someone to be loyal. Not even Tony Soprano could pull that off. You can’t even pay someone to be loyal. Somebody else will always come along with a better offer. Loyalty can only be earned.
Nothing I’ve learned in the past 20 years has made me think that the concepts laid out in the service profit chain no longer apply. When I became CHRO at Cleveland Clinic in December of 2007, the Clinic was (as it continues to be) renowned for its outstanding clinical results and medical breakthroughs. Nonetheless, the Clinic’s performance back then in terms of patient satisfaction did not match its reputation. When the results of the Federal government’s first patient experience survey (the so called “HCHAPS”) came out in 2008, the Clinic’s overall rating was just average, and its scores on the individual metrics were below average across the board. In the CEO’s words, “People come to us, we save their lives, but they don’t like us very much.”
Not surprisingly, at least to anyone who understood the service profit chain, the Clinic also had a serious employee engagement problem. When we commissioned Gallup to do an engagement survey in 2008, our scores were only in the 44th percentile of large healthcare systems.
To turn the situation around we launched a series of enterprise initiatives, some focused directly on the patient experience but many focused on improving employee engagement. For example, we changed our institutional language to refer to everyone at the Clinic as a “caregiver.” This reminded us in a small but important way that we were all in the value chain of delivering care and creating a safe, supportive experience for our patients and their families. Not just the physicians and nurses, but also the food service workers, the facilities staff, the people who transported patients around the hospital.
We also launched a new caregiver wellness program, a new caregiver recognition program, and significant upgrades to an array of benefit programs. Equally important was the gradual implementation of servant leader training for leaders at every level, from supervisors to top executives.
Servant Leadership, which I’ve discussed in other blog postings and journal articles, has been implemented in a wide array of customer-focused organizations, including such industry leaders as Southwest Airlines, Starbucks, Marriott, Toro, and Kaiser Permanente. Compared to command-and-control leadership, servant leadership emphasizes moral authority rather than position power.
To help us transition to servant leadership, we worked closely with Ken Jennings and his Third River Partners organization. In Ken’s words, servant leaders—or in his language, serving leaders—“upend the pyramid, build on strengths, raise the bar, blaze the trail, and run to great purpose.”
Servant leaders put the enterprise and their people first in everything they do. They find ways to empower others. They focus on removing the barriers that prevent others from succeeding. They listen more and talk less. In short, servant leaders are caring leaders.
What did all this achieve at Cleveland Clinic? As these initiatives took hold and became embedded in the culture, caregiver engagement rose to the 87th percentile, and patient satisfaction rose in direct parallel.
So let me lay it out one more time: business success depends on customer loyalty, which depends on high levels of customer satisfaction, which depend on high levels of employee performance, which in turn depend on high levels of employee engagement. And that depends on caring leadership.
Now ask yourself: what is your organization doing to connect those dots?
Note: For more discussion of servant leadership and employee engagement, please visit www.gsummit.co.
The 2018 CFO Leadership Conference is going to be a two-day event that you can’t afford to miss. For more information on our agenda and registration, please go here.
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