The Low Cost of Higher Customer Satisfaction

In an effort to improve employee performance, companies often overlook the simplest of rewards…those that say thanks but cost companies nothing.  In the paper Getting More Work for Nothing? Symbolic Awards and Worker Performance, researchers Michael Kosfeld and Susanne Nekermann describe an experiment they conducted in Switzerland to determine if symbolic, non-monetary awards increase worker productivity. They hired 150 people to do two hours of work for a non-profit group. They were paid the equivalent of $37 to search the web for contact information about local government officials so the non-profit could approach them for financial support. Each subject was asked to enter their findings into a database.  The “workers” were assigned to small groups of about 9 people each and given enough privacy so that no one could see how hard they were working. Much like in real life, they also had the opportunity to surf the web or check their personal email.

Eighty-three of the subjects were assigned to groups which were told they would be competing for an award. They were shown an example of the award consisting of a personalized congratulatory card that was signed by the president and managing director of the organization. The reward had no monetary value and subjects were told that there would be no future employment opportunities. The workers were not told specifically how the award would be determined. The remaining subjects, the control group, worked under exactly the same conditions except that they were not told of an award.

Kosfeld and Nekermann found that the workers who were offered the reward outperformed the control group, those who were not told about a reward, by 12 percent (as measured by the amount of information gathered). There was no difference in quality between the two groups so the award group did not sacrifice quality to try to achieve higher performance. The main message of the paper is that social recognition matters. The authors claim that this does not dismiss the importance of monetary incentives, but believe that it is likely that recognition and monetary rewards reinforce each other. Kosfeld and Nekermann also point out that purely symbolic awards may not increase performance in all circumstances, but should be taken into account.

High performing sales people typically receive monetary rewards and non-monetary recognition, but this is often overlooked in customer service. A large part of the problem is that few companies measure customer satisfaction, and if they are not measuring it, it is extremely difficult to manage and reward employees for providing a superior experience. This is particularly true at banks and credit unions. While sales results get all the attention, customer service excellence is seldom recognized. This is a problem because research consistently shows that increases in customer satisfaction lead to increases in sales (not to mention retention). Our research at Prime Performance has shown that when customer satisfaction at branches goes up significantly, new deposit balances can increase as much as 16 percent.

Kosfeld and Nekermann’s paper supports what we typically see with our clients. When managers focus on customer satisfaction and recognize successes, customer satisfaction scores go up, even when there is not a monetary reward attached to performance. When carefully crafted monetary rewards are added, customer service reaches the same level of importance as sales. When this is achieved, customers notice, retention increases and sales go up.

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