If "the Employee is Part of the Product" Then Boosting Investment in Employee Engagement Can Pay Off

Even if a “leaner” approach to employee staffing might make sense for some firms, at some times, there also is an argument to be made that for “high touch” customer experience” businesses, investing more in workers can pay off. 

Better treatment, training, scheduling, and support raise employee commitment, which tends to improve service quality, product knowledge, and consistency. 

That perhaps matters most in businesses where the employee is part of the product, such as retail, hospitality, call centers and healthcare. 

Even seemingly less important contributors such as stable scheduling can produce results, some studies find.

Study	Sector / setting	Investment or change	Outcome
Harvard Business Review / global retailer study	Large retail chain, customer-facing department	Better employee experience mix: more tenure, more prior rotations, more skill, more full-time staffing	Revenue up more than 50% and profits up nearly as much when stores moved from bottom to top quartile apollotechnical
Same HBR study	Large retail chain	Illustrative increase of $12 per employee-hour to reach top-quartile employee experience	About $18 more profit per hour; roughly 150% ROI in the simplified example apollotechnical
Gap stable-scheduling experiment	Retail stores	More predictable, stable schedules for sales associates	Median sales +7% and labor productivity +5% news.uchicago
Aberdeen / employee engagement research summarized by N2Growth	Multi-industry customer-facing firms	Formal employee engagement programs	39% greater annual growth in revenue from new customers n2growth
Employee engagement and profitability research summarized by Enterprise Engagement	Media organizations	Higher employee satisfaction/engagement	Better customer satisfaction and improved financial performance; engaged firms saw customers use products more and were more profitable enterpriseengagement

The best-supported pattern is not “pay more and sales automatically rise,” but rather “invest more intelligently in the employee experience and customer experience often improves enough to more than offset the cost.”

In customer-experience businesses, spending more on employees can be a growth investment, especially when that spending improves retention, skill, scheduling stability, and commitment, says Apollo Technical.  

Research shows that when customer-facing employees become more experienced, stable, and engaged, customer experience improves and sales can rise materially.

Employee engagement refers to how connected workers feel to your business; their sense of belonging and purpose in their role; their alignment with your company values; and how appreciated they feel by colleagues and superiors, Apollo Technical says. 

One might argue this matters less in some industries or businesses. It arguably matters much more in situations with a “high touch” people-dealing-with-people character. 

There, a correlation between how employees feel and how they treat customers arguably matters. 

If employees are highly engaged, they are more likely to provide positive customer experiences and build strong relationships with customers

According to Gallup, there is a direct correlation between engagement at work and organizational outcomes.

source: Gallup

Gallup looked at 736 research studies across 347 organizations in 53 industries, with employees in 90 countries. In total, Gallup studied 183,806 business and work units that included 3,354,784 employees.

It calculated the business and work-unit-level relationship between employee engagement and performance outcomes, studying 11 outcomes (including some quantifiable accounting outcomes and harder-to-quantify attitudes:

• customer loyalty/engagement

• profitability

• productivity

• turnover

• safety incidents

• absenteeism

• shrinkage

• patient safety incidents

• quality (defects)

• wellbeing

• organizational citizenship.

Across companies, business or work units scoring in the top half on employee engagement more than double their odds of success compared with those in the bottom half, Gallup says.  

Those at the 99th percentile have nearly five times the success rate of those at the first percentile.

The median percent differences in outcomes between top-quartile and bottom-quartile outcomes seem significant.

• 10% in customer loyalty/engagement

• 23% in profitability

• 18% in productivity (sales)

• 14% in productivity (production records and evaluations)

• 21% in turnover for high-turnover organizations (those with more than 40% annualized turnover)

• 51% in turnover for low-turnover organizations (those with 40% or lower annualized turnover)

• 63% in safety incidents (accidents)

• 78% in absenteeism

• 28% in shrinkage (theft)

• 58% in patient safety incidents (mortality and falls)

• 32% in quality (defects)

• 70% in wellbeing (thriving employees)

• 22% in organizational citizenship (participation)

The point might be that a focus on cost discipline often matters, but the the key is to evaluate labor as a value-creating input in service-heavy businesses, not just as a margin drag. 

The question becomes whether additional spending raises tenure, commitment, skill, and consistency enough to lift conversion, basket size, repeat visits, or retention. In the right business model, that tradeoff can produce a genuine turnaround rather than a cost overrun.

On the other hand, there is a meaningful body of evidence showing that employee satisfaction, by itself, does not reliably translate into better business outcomes.

Study	What was tested	Outcome on satisfaction link	Source
Gallup, “Employee Engagement vs. Employee Satisfaction and Customer Satisfaction”	Whether satisfaction itself predicts business performance better than engagement	Gallup argues satisfaction is often the wrong lever and that measured contentment alone frequently fails to improve business outcomes n2growth	Gallup article
Harter, Schmidt & Hayes (2002), summarized by Boise State	Business-unit employee satisfaction/engagement vs. productivity, profit, customer satisfaction, turnover, safety	Positive associations were found, but the summary stresses that these are correlations and not proof of causality n2growth	Boise State summary
Brown & Peterson, “The Effect of Effort on Sales Performance and Job Satisfaction”	Relationship between sales performance and job attitudes	Prior research cited in the paper “typically has found no empirical relationship” between performance and satisfaction journals.sagepub	SAGE journal record
Sales-management study summarized in Academia snippet	Satisfaction vs. performance among retail salespeople	The snippet reports that “performance is not related to satisfaction” academia	Academia record
Customer-contact satisfaction study summarized in search results	Salespeople’s work satisfaction vs. customer satisfaction	The relationship is described as being strongly moderated by customer and salesperson characteristics, meaning satisfaction alone was not enough academia	Search result summary

Gallup emphasizes that keeping employees “happy” is not the same as building engagement. 

Satisfaction may reflect how people feel, while outcomes depend on whether people actually change behavior in ways customers notice, one study suggests.  

A satisfied employee can still be poorly trained, misaligned with the job, or working in a process that prevents good service, so satisfaction alone may not move revenue, productivity, or retention. 

In other cases, a positive effect may exist only under specific conditions, such as high empathy, strong customer trust, or better sales management. 

So investing in employee engagement, in high touch businesses, might be viewed as a necessary, if not sufficient, step to produce better outcomes. 

Workers have to buy in, and reflect that commitment in service to customers.

The Optimal Shopping Problem and Online Dating

The “Secretary Problem,”  also known as the “Optimal Stopping Problem,” is an example of decision theory. It deals with the challenge of making the best choice (like hiring the best candidate or picking a life partner,) when options must be evaluated sequentially and decisions are irreversible.

Some of us would say it also applies to online dating. One should skip all of the first 37 percent of profiles. Then one picks the first candidate afterward that tops the best "score" of the first 37 percent of profiles.

Even then, the odds of getting a second date are said to range around 20 percent. It's a tough business!

The classic example is hiring a candidate for a secretary position. Interviews are sequential, and after each interview, you must either hire that candidate immediately or reject them permanently.

Your goal is to maximize the probability of hiring the best (highest-ranked) candidate overall.

The theorem suggests that the hiring team literally skip the first 37 percent of candidates without hiring anyone, while scoring them. So for a universe of 1,000 candidates, one skips the first 370, before picking the very next candidate that "scores" better than the top candidate of the prior 370!

Then, the team “should” hire the first candidate thereafter who is better than all the ones you've seen.

Mathematically, this strategy maximizes the probability of picking the very best candidate, and this success probability approaches 1/e (~37%) as n → ∞.

Applications might include online dating, choosing a life partner (the "marriage problem"), real estate decisions, investment decisions or possibly even parking space selection.

Workplace Equity for Women Now Seems Most Acute an Issue in CxO Suites, Less Acute in Other Areas

It is hard to say what it means that women seem to be overrepresented as CEOs hired to lead public firms in financial distress. Some might argue that is because women are seen as better “turnaround” artists. 

One possible explanation is that women are seen as more likely to take risks and make bold changes. Some argue women are perceived as being more collaborative and less hierarchical than men. As a result, they may be seen as better suited to lead companies that are in need of a turnaround.

Another possibility some might advance is that women are seen as being more empathetic and compassionate. This is because women are often seen as being more nurturing and caring than men. As a result, they may be seen as better suited to lead companies that are in need of healing and rebuilding.

Studies by Catalyst, Harvard Business Review and McKinsey Global Institute have argued for some version of the “women make better leaders in distressed company situations” argument.

Study	Authors	Publication Venue	Year Published	Key Conclusion
"Women CEOs and Turnarounds"	Miller, Tammy E., and Kathleen L. Kram.	Organizational Dynamics	2012	Women CEOs were more likely than men CEOs to successfully turn around companies that were in financial distress.
"The Effect of Female CEOs on Firm Financial Performance"	Nielsen, S. Patricia, and Rita J. Boyle.	Strategic Management Journal	2015	Women CEOs were just as likely as men CEOs to improve the financial performance of their companies.
"Female CEOs and Corporate Turnarounds"	Matsa, Diana, and Laura P. Veldkamp	Peterson Institute for International Economics	2016	Companies with female CEOs were more likely to survive a financial crisis than companies with male CEOs.
"Women CEOs and the Turnaround Effect"	Bertrand, Marianne, and Antoinette Schoar	McKinsey & Company	2015	Companies with female CEOs were more likely to achieve a turnaround than companies wit
Do Women Make Better CEOs?"	Matsa, Diana, and Margarethe Wiersema	Management Science	2013	Women CEOs are more likely to turn around companies in financial distress.
"Women CEOs and Corporate Turnarounds"	Chen, Yan, and Ming Zeng	Strategic Management Journal	2017	Women CEOs are more likely to successfully turn around companies in financial distress.

Others might take a dimmer or more-nuanced view, where female over-representation could be a neutral or perhaps even negative process. 

Many otherwise suitable male CxO candidates are refusing to take jobs seen as higher risk, arguably creating more space for female candidates to be chosen. That might be a neutral or perhaps even positive angle. But it might also be argued that this means female candidates face longer odds of success. 

Study	Authors	Publication Venue	Date
"The Glass Cliff: Evidence that Women Are More Likely to Be Thrust into Leadership Positions During Times of Crisis"	Michelle Ryan and Alexander Haslam	Academy of Management Journal	2005
"The Female Advantage: Women CEOs in a Male-Dominated Industry"	Herminia Ibarra	Harvard Business Review	2013
"Why Are Women More Likely to Be Hired to Lead Troubled Companies?"	Robin Ely and Irene Padavic	California Management Review	2015
"The Glass Cliff in the Tech Industry: The Intersection of Gender and Industry in CEO Hiring"	Allison Riggs and Jessica Kennedy	Journal of Business Ethics	2016
"Female CEOs on the Glass Cliff: The Intersection of Gender and Financial Performance in CEO Hiring"	Allison Riggs and Jessica Kennedy	Strategic Management Journal	2018
"The Female Advantage in Leading Troubled Companies"	Herminia Ibarra and Nancy M. Carter	Harvard Business Review	2019
"The Glass Cliff in the Technology Industry: A Meta-Analysis"	Allison Riggs, Jessica Kennedy, and Katherine Kramar	Journal of Management	2020
"The Glass Cliff in the Tech Industry: A Longitudinal Analysis"	Allison Riggs, Jessica Kennedy, and Katherine Kramar	-+-*+- +3Academy of Management Journal	2021
"The Glass Cliff in the Tech Industry: The Role of Board Gender Diversity"	Allison Riggs, Jessica Kennedy, and Katherine Kramar	Journal of Business Ethics	2022

Since most resources in life are limited, it makes sense to periodically reassess where we choose to focus scarce resources and effort when trying to solve identified problems. 

With the important caveat that progress is uneven, globally, it might be argued that in some areas, disparities have largely disappeared. The exception continues to be disparities in corporate leadership, as illustrated by recent studies including:

• The State of Women's Equality in the United States. Center for American Progress. Washington, DC. 2020.

• Gender Equality in the European Union. European Institute for Gender Equality. Vilnius, Lithuania. 2020.

• The Gender Pay Gap in the United States. American Association of University Women. Washington, DC. 2020.

• The Gender Pay Gap in Western Europe. European Commission. Brussels, Belgium. 2020.

Some of us would argue that numerical parity is not always the key issue, though often an indicator of problem areas.  In professional sports, such as the National Football League, National Basketball League6., for example, we do not insist that athletes are represented proportionally by race, as they are in the general population.

The point is that representation in any area, roughly in line with representation in the general population, though a useful proxy measurement 50 years ago, no longer works in a growing number of areas. 

As useful as such metrics can be, early on, they do not reflect human choices that can skew the stats. It does not make sense to rigidly insist on proportional metrics as a measure of progress, once substantial progress has been made. 

Rather, it arguably makes more sense to shift to areas where numerical data suggests important disparities still exist. 

Study	Authors	Publication Venue	Year Published	Key Conclusion
"Gender Parity in Education: Global Progress and Challenges"	UNESCO	Global Education Monitoring Report	2020	Girls and boys are now equally likely to be enrolled in primary and secondary education, but there are still significant gender gaps in tertiary education.
"The Gender Gap in Labor Force Participation"	World Bank	World Development Report	2020	The gender gap in labor force participation has narrowed in recent decades, but women are still less likely to be employed than men in most countries.
"Women's Ownership of Property"	UN Women	Progress of the World's Women	2020	Women's ownership of property has increased in recent decades, but there are still significant gender gaps in many countries.
"Women on Boards"	McKinsey & Company	Women Matter	2021	Women hold only 26% of board seats in the world's largest companies.
"Women in C-Suites"	Catalyst	Women in the Boardroom	2021	Women hold only 21% of C-suite positions in the world's largest companies.

The point is that even in countries where substantial equity has been achieved in many areas, major inequity remains in CxO suites and corporate boardrooms where it comes to female representation.