Customer Satisfaction and Employee Satisfaction: A ... Customer Satisfaction and Employee Satisfaction: A Conceptual Model and Research Propositions 1. Introduction The study of customer satisfaction

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1 Customer Satisfaction and Employee Satisfaction: A Conceptual Model and Research Propositions Abstract Purpose: The marketing literature reflects remarkably little effort to develop a framework for understanding how customer responses to service affect the work attitudes of employees. In particular, very little is known about the influence of customer satisfaction and customer satisfaction outputs on the individual employees work satisfaction. Theoretical Background: The authors draw on balance theory and emotional contagion theory to provide a foundation for future research by developing research propositions, and constructing a framework for understanding how customer satisfaction influences employee satisfaction. Practical Implications: Managers can use the information from this study as a guide for matching employees to customers. Keywords: Employee Satisfaction, Customer Satisfaction, Employee-Customer Identification, Emotional Contagion, Balance Theory, Customer Status Track: Services Marketing 2 Customer Satisfaction and Employee Satisfaction: A Conceptual Model and Research Propositions 1. Introduction The study of customer satisfaction, along with its determinants and outcomes is a major area of interest among marketing academia. In terms of outcomes of customer satisfaction, performance and loyalty have been the major variables considered. However, in recent years, there is a growing a body of research which focuses on how customer satisfaction affects employees (Pugh, 2001, Ryan, Schmidt and Johnson, 1996; Yi, Nataraajan and Gong, 2011; Luo and Homburg, 2007). The idea that customer outcomes might influence employee attitudes has been present in the literature for over four decades. For example Friedlander and Pickle (1968: ) suggest that Customer satisfaction may fulfill employee service needs, thereby causing employee satisfaction. However till date, very little empirical attention has been devoted to the potential impact of customer satisfaction on employee satisfaction. To the researchers knowledge, only three empirical studies (Ryan, Schmidt, and Johnson, 1996; Pugh, 2001; Luo and Homburg, 2007) have explicitly addressed this issue. A careful examination of the limited literature on this topic reveals two important gaps. First, most extant studies have discussed or tested a direct relationship between customer and employee satisfaction. This leaves the reader with a black box of process. There is therefore need for more theoretical work explaining this key relationship. Second, there is a need to better understand what factors make an employees work satisfaction more or less prone to the influence of customer satisfaction? The limited literature in this area, by focusing on aggregate employee satisfaction, often implicitly assumes that employees are similarly influenced by customer satisfaction or dissatisfaction. This is unlikely because individual characteristics, job characteristics as well as relational dynamics might result in work satisfaction being influenced to different degrees by customer satisfaction. From a practice perspective, describing conditions under which the relationship between customer satisfaction and employee satisfaction may be stronger or weaker provides information to aid managers in the individual management of employees. The purpose of this article, therefore, is to delineate the effect of customer satisfaction on employee satisfaction, develop a propositional inventory, and create a framework for directing future research in this area. While there are studies that focus on how employee satisfaction influences customer satisfaction (e.g., Evanschitzky, Sharma and Prykop, 2012; Homburg and Stock, 2005), our study, without conflicting with these studies, examines customer satisfactions influence on employee work satisfaction. In developing propositions, we draw on the literature in marketing and related disciplines. Figure 1 is a conceptual model for our discussion. 2. Literature Review and Research Propositions Work satisfaction is defined as an employees sense of satisfaction not only with the work itself but also with the larger organizational context within which work exists.Customer satisfaction is defined as an attitude resulting from an evaluative process where a standard 3 concerning an offer obtained from a company is compared to the customers perception of the actual offer (e.g., Oliver, 1996). For reasons of parsimony, we do not discuss level of analysis issues or the different facets of customer satisfaction overall satisfaction with the firm, satisfaction with the employee etc.in this paper. Figure 1: Customer Satisfaction and Employee Satisfaction EMPLOYEESCUSTOMERSPICSSATISFACTIONEMOTIONSCOMPLAINTSCOMPLIMENTSEMOTIONSSATISFACTIONECIDESECESEC: Employee susceptibility to emotional contagion; ECID: Employee Customer Identification PICS: Perceived Importance of customer Satisfaction 2.1 Mechanisms of Influence: How does the influence occur? In explaining the direct and mediated paths linking customer satisfaction and employee satisfaction, we draw upon three principles of social psychology that link individuals interactions and their attitudes. First, individuals seek balance, which may be achieved by modifying their attitudes to correspond to those of others (Heider, 1958). Second, information theory suggests that individuals sentiments are influenced by the information to which they are exposed through interaction with others (Anderson 1971). Third, emotional contagion theory holds that exposure to someone elses positive or negative emotions can produce a corresponding change in the observers emotional state (Pugh, 2001) and subsequently lead to attitude change. 4 2.2 Mediators: Direct Outputs of Customer Satisfaction The key mediators which link customers satisfaction to employee satisfaction are customers reactions following their evaluation of satisfaction or dissatisfaction as well as their expressed emotions. Literature suggests that complaining about service or complimenting service employees are two potential reactions that may emanate from satisfaction judgements. Furthermore, customers might express negative or positive emotions depending on their satisfaction levels. Consequently Proposition 1: Customer satisfaction has a direct effect on customers complaining behaviour Proposition 2: Customer satisfaction has a direct effect on customers complimenting behaviour Proposition 3: Customer satisfaction has a direct effect on customers emotions 2.3 Employee Work satisfaction: why should customers matter? In the internal marketing literature, work satisfaction is often thought to be the result of controllable elements of the work environment and work conditions. However, while intuitively convincing, working conditions as the major cause of work satisfaction have been challenged. Research suggests that non-controllable elements also impact on the satisfaction of employees and in particular frontline employees. Furthermore, there is a growing appreciation that outputs of customer contact employee interactions with customers (e.g., customer satisfaction) are also determinants of employee satisfaction (Bell et al., 2004; Luo and Homburg, 2007). There are a few reasons for this. First, a need fulfillment theory perspective (Vroom, 1964), suggests that work satisfaction is the result of good performance (Bagozzi, 1980). Second, customer satisfaction and its outputs serve as feedback to the employee about how their work and their organization are perceived (Bell et al., 2004). Third, customer satisfaction should influence employee work satisfaction because it indicates the attractiveness of the organization as an employer and thus signals better future opportunities for the employee (Luo and Homburg, 2007). Therefore Proposition 4: Customer satisfaction has a direct effect on employee satisfaction Proposition 5: Customer complaining has a direct effect on employee satisfaction Proposition 6: Customer compliments has a direct effect on employee satisfaction 2.4 Employee Emotions Emotional contagion effects are likely to flow from customers to employees because individuals are more likely to transmit their emotions to others when they are able to express these emotions (Hatfield, et al., 1994). We argue that customers are more likely than employees to consciously display emotions related to their experiences in the service encounter. Individuals are also likely to assimilate the emotions of individuals to whom they pay attention to. Furthermore, employees are likely to pay attention to the emotions of customers because they depend more on the customers than vice-versa (Hatfield et al., 1994). 5 We also suggest in line with previous research that employee emotions are directly influenced by customer complaints and customer compliments. Therefore Proposition 7: Customer emotions directly influence employee emotions Proposition 8: Customer complaining has a direct effect on employee emotions Proposition 9: Customer compliments has a direct effect on employee emotions 2.5 Employee Emotions and Employee Satisfaction We also suggest that employee emotions are crucial in determining how satisfied employees are with their work. Employees who experience negative emotions on the job are less likely to be satisfied than those who experience positive emotions. Therefore Proposition 10: Employee emotions directly influence employee satisfaction 2.6 Moderators 2.6.1 Perceived Importance of Customer Satisfaction: Research has shown that the effect of feedback on individuals depends on how important that feedback is to the individual (Earley, 1986). In essence, while some employees would perceive feedback in terms of customer satisfaction as very important, others might perceive it as less important. These differences in importance perceptions may result from different individual characteristics such as levels of customer orientation or from perceptions of the consequences of customer satisfaction on personally-relevant outcomes might differ from one employee to another. For example, some employees may not consider their promotion to be significantly dependent on customers satisfaction while others might perceive the opposite. As a result of differences in perceived importance, we expect that, for all levels of customer satisfaction, there would be differential impacts of customer satisfaction on work satisfaction. Therefore: Proposition 11: The effects of customer complaints, customer compliments, and customer emotions respectively on customer emotions are moderated by the perceived importance of customer satisfaction to the employee Proposition 12: The effects of customer complaints and customer compliments on customer satisfaction are moderated by the perceived importance of customer satisfaction to the employee 2.6.2 Susceptibility to emotional contagion: Previous literature has documented individual differences in susceptibility to emotional contagion due to differences in gender, culture, personality, occupation, and so on (Hatfield et al., 1994). Translated to an organizational context, differing levels of susceptibility should influence both the actions and reactions of employees to events. Verbeke (1997), for example, found that salespersons that are more sensitive to the emotions of their customers could perform better yet incur higher risks of burnout in a sales organization. Accordingly, we conjecture that the effect of customer 6 satisfaction on employee work satisfaction will depend on how susceptible employees are to the emotions of customers. Therefore: Proposition 13: Susceptibility to emotional contagion increases the effect of customer emotions on employee emotions 2.6.3 Employee-Customer Identification: Recent advances in social identity theory suggest that identification with customers can also be a powerful source of self-definition (Korschun, Bhattacharya and Swain, 2010). When a social identity is salient, people see themselves as relatively interchangeable members of the group rather than as unique individuals; a process known as depersonalization (Mackie et al., 2008). Depersonalization causes an individual to react as a group member rather than as a unique individual, and so events have emotional consequences based on how they affect the group and not the individual. Consequently, we suggest that the more the employee identifies with the customer, the more the employees will be influenced by the customers actions and emotions. Therefore: Proposition 14: The effects of customer complaints, customer compliments, and customer emotions respectively on customer emotions are moderated by the employee-customer identification 3. Managerial Implications First, our research suggests that customer satisfaction should impact upon employee work satisfaction. This is important because, if customer satisfaction directly influences employee satisfaction, then in addition to efforts by the organization to improve employee work satisfaction efforts may also be focused on directly improving customer satisfaction. Second, the research clearly delineates the process of influence as well as factors that can be expected to strengthen or weaken the effect of customer satisfaction on employee work satisfaction. While many of these factors are not controllable, some of them are controllable by managers and therefore can be altered by them so that customers satisfaction might more readily influence employee satisfaction. For example, managers can act to make customer satisfaction more personally relevant (and so important) to employees through restructuring of rewards. Managers can also use the information from this study as a guide for matching employees to specific customers. For example, when faced with a difficult customer, who is constantly dissatisfied, managers might choose to match such a customer with an employee who is less likely to be influenced by the customers emotions and attitudes. In conclusion, our propositional inventory and conceptual framework represent efforts to build a foundation for understanding how customers influence employees. Future studies can improve knowledge by expanding the framework and empirically testing our propositions. 7 Selected References Anderson, N. H. (1971). Integration theory and attitude change. Psychological Review, 78 (3) 171206. Ashforth, B. E., Harrison, S. H., & Corley, K. G. (2008). Identification in organizations: An examination of four fundamental questions. Journal of Management, 34(3), 325-374. Dormann, C. & Zapf , D. (2001). Job satisfaction: a meta-analysis of stabilities. Journal of Organizational Behavior 22(5): 483-504. Earley, P. C. (1986). Trust, perceived importance of praise and criticism, and work performance: An examination of feedback in the United States and England. Journal of Management, 12, 457-473. Hatfield, E., Cacioppo, J.T , & Rapson, R. (1994). Emotional Contagion. New York: Cambridge University Press. Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley. Judge, T.A.; Bono, J.E.; Erez, A. & Locke E.A. (2005). Core self-evaluations and job and life satisfaction: the role of self-concordance and goal attainment. Journal of Applied Psychology, 90 (2), 257268 Locke, K.D. (2003). Status and solidarity in social comparison: agentic and communal values and vertical and horizontal directions. Journal of Personality and Social Psychology, 84 (3), 619- 631. Luo, X., & Homburg, C. (2007). Neglected outcomes of customer satisfaction. Journal of Marketing, 71(2), 133-149. Mackie, D. M., Smith, E. R., & Ray, D. G. (2008). Intergroup emotions and intergroup relations. Social and Personality Psychology Compass, 2(5), 1866-1880. Pugh, D.S. (2001). Service with a smile: Emotional contagion in the service encounter. Academy of Management Journal, 44 (5), 10181027. Ryan, A. M., Schmit, M. J. & Johnson, R. (1996). Attitudes and effectiveness: Examining relations at an organizational level. Personnel Psychology, 49 (4): 853882. Vroom, V. H. (1964). Work and Motivation. New York: Wiley. Yi, Y., Nataraajan, R., & Gong, T. (2011). Customer participation and citizenship: behavioral influences on employee performance, satisfaction, commitment, and turnover intention. Journal of Business Research, 64(1), 87-95.

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