When Rentokil Initial embarked on a five-year turnaround plan that put customer service at the heart of its business, director of communications Malcolm Padley saw an opportunity for a research project analysing the factors that drove employee engagement and transformed its workforce into brand ambassadors.
But more than that, Padley wanted to identify whether links existed between employee engagement and customer satisfaction and how these could impact the bottom line of the rat catcher-to-school meals group.
He had long admired the groundbreaking Employee-Customer-Profit Chain project conceived by American department store chain Sears in the late 1990s, and wondered if something similar could be created at Rentokil Initial.
A management team at Sears spent three years rebuilding the retailer around its customers and, in the course of this rethinking, developed a business model that tracked success from management behaviour through employee attitudes to customer satisfaction and financial performance. That analysis found that a five point increase in employee attitude (in other words, engagement) within Sears translated into a 1.3 point in customer impression which, in turn, resulted in a 0.5 per cent increase in revenue growth.
'I wanted to find if there was an invisible thread in Rentokil that if you pulled one way could have an impact another way,' says Padley. 'Was there a linkage between colleagues, customers and shareholders that could be drawn upon?
'The nature of our business is that there isn't one standard. We operate in different countries, with cultural differences and different services.'
Group wide survey
Three years ago, shortly after embarking on its turnaround plan, Rentokil Initial conducted an employee engagement survey that involved all 66,000 staff across 60 countries. 'It was the first time that they had the opportunity to take part in the same survey,' explains Padley. 'Local managing directors wrote their own introductions for their staff, and the surveys were translated into relevant languages.'
The Your Voice Counts survey, which is conducted annually by Hay Group, was ongoing and had helped pinpoint areas of improvement, generating up to 2,200 action plans from branch to divisional level. But this was the first group-wide version and Padley wanted to extract more value from its results.
'We had conducted a 35 question survey over three years to measure employee engagement, but we also had data on what customers thought of us and information for our shareholders. Having got all this data, I wondered if we could take the Sears' approach,' says Padley.
Hay Group was asked to mine the 2009 survey and identify potential linkages between statistics. They were specifically looking for relationships between the Your Voice Counts 2009 survey and three sets of Rentokil Initial's 16 key performance indicators (KPIs) covering the 15 months until February 2011.
They were particularly looking at relationships between financial KPIs, such as gross margin and revenue growth; employee data, such as retention statistics for sales and service staff; and customer data, around service quality and customer retention.
Hay Group took a two-pronged approach. They used statistical analysis to find correlations between the survey responses and KPIs and then they used a gap analysis, looking at survey results from the top and bottom performing business units to pinpoint the biggest opinion gaps.
'We sought strong correlations and strong gaps,' explains Padley. 'Hay Group will say that if one set of data has a 0.1 per cent impact on key performance indicators then that is pretty strong. Our impacts were coming back at between 0.3 per cent and 0.5 per cent.'
The analysis also revealed that engagement levels for Rentokil's service and sales colleagues were impacted by different factors. 'Enablement' had a big impact on the level of engagement for service colleagues; they felt more engaged if they felt able to get the job done. Enabling might be as simple as making sure the right tools were available to them or ensuring colleagues were in the right roles.
'We found that great engagement was not enough for our service colleagues. If they were engaged but did not feel enabled, then that led to frustration,' says Padley. 'Retention is a major key performance indicator. The cost of replacing colleagues has been estimated at 1.5 times annual salary, plus opportunity costs, so we need retention.'
The analysis found that enablement was linked to retention, particularly for service employees, where a one percentage point improvement in enablement improved retention by 0.45 per cent. While health and safety performance is driven by many factors, enablement also had an impact. Levels of health and safety were significantly higher where colleagues were particularly enabled.
Indeed, enablement came out as a strong predictor of performance across Rentokil Initial. The analysis found that enablement accounted for eight per cent of variance in the group's gross margin; for every one percentage point that employees feel more enabled, Rentokil's gross margin will rise by 0.5 per cent. Sales colleagues, on the other hand, valued respect and recognition more than enablement. 'We recognised that if we focused more on hearts and minds with our sales colleagues that it was effective in improving engagement,' says Padley.
Recognition plays a role
'There was a strong correlation between recognition and service levels. So we have introduced a series of recognition schemes across the group, and given our management the tools to recognise performance.' This might be as simple as informal entertaining or remembering to send out congratulatory messages for particular good service. Rentokil Initial already ran a formal annual awards scheme.
'We want to move from great customer service to great customer care, and the question is how do we do that? What should we focus on? What should we invest in? Recognition plays a role here,' says Padley. 'We carried out some additional focus groups around recognition and heard all the horror stories. In one division, a manager sent out Christmas cards that arrived in January and weren't even signed.'
Engagement also had an impact on gross margin. Teams with top quartile gross margin had levels of engagement that were five percentage points higher than the bottom quartile teams.
'What this analysis has pinpointed is that enablement is just as important as engagement for Rentokil Initial,' explains Padley. 'This has given us some real insight into where to invest resources from a communications point of view.'
But companies do not stand still. 'They may make a big acquisition or economic conditions may change. There are other things to consider,' says Padley. There are now plans to repeat the exercise to assess whether the recession has impacted any linkages. 'This can only give you a picture of everything being equal at a moment in time,' he concludes. 'But it does provide a real focus.'