Despite the corporate communication rhetoric that both employees and customers are vital to the success of a company, company executives as well as academic researchers focus more of their attention on customers and less on employees.
In the past few decades, corporate attitudes have evolved from a “customer is always right” mindset to the recognition that employees are as vital to the success of a company as customers. Corporate internal and external communications declare that satisfied and engaged employees are as critical to success as satisfied customers.
According to a Columbia University study, the rhetoric does not match reality. In a variety of contexts, the study reveals that customers are a significantly higher priority for executives and board members than employees.
For example, an analysis of more than 30,000 earnings calls by S&P 500 firms between 2007 and 2019 showed that in 92% of the calls, executives mentioned the firm’s customers at least once. In contrast, employees were mentioned at least once in only 55% of the calls. From another perspective, on average, nearly 6.5% of an earnings call time was devoted to customers, as compared to .5% of the average call devoted to employees an astonishing ten times more time spent on customers than employees. The data also showed that the bias towards customers steadily increased between 2007 and 2019.
The researchers also examined the tone with which executives talked about employees and customers in these earnings calls, using the psychological concept of promotion focus versus prevention focus. Individuals with a promotion focus succeed by focusing on positive goals, while individuals with a prevention focus seek to avoid mistakes and missteps. Executives used more prevention-focused language when talking about employees while using more promotion-focused language when talking about customers. In other words, while employees tended to be viewed negatively as risks, customers tended to be viewed positively as opportunities.
The bias for customers over employees was also manifested in profiles of executives and directors taken from the BoardEx database. Using keyword technology to characterize the professional background of executives and directors on the boards of more than 2 million companies around the world between 1991 and 2021, the researchers found that more than 8% of the executives and board members had marketing and customer-related experience versus only about 1% with human resources and employee-related experience. An analysis of the directors on the boards of Indian firms found the same bias towards customer-related or marketing backgrounds, although the disparity was not as wide.
The attitudes of academics were found to be as biased toward customers as practitioner attitudes. For example, academic books and textbooks on strategy mentioned customers more than 4 times more frequently than employees. Business and strategy books targeted to practitioners mentioned customers 9 times more frequently than employees.
Using keywords to analyze the abstracts (short summaries) of articles appearing since 1990 in two academic journals focused on strategy, Strategic Management Journal and Management Science, further confirmed the academic bias towards customers: the number of articles focused on customers was twice as high as the number of articles focused on employees. (In contrast, the Academy of Management Journal paid scant if any attention to customers, reflecting the organizational behavior focus of its content.)
The Harvard Business Review and the Sloan Management Review business journals aimed at practitioners more than academics were no different. Analysis of article titles in HBR between 1922 and 2021 and SMR between 1970 and 2022 showed that the number of articles about customers tripled since 2000; the number of articles about employees stayed the same.
The research raises interesting questions as to the motivation for this preference for customers despite the rhetoric. One possible reason: perhaps customers are indeed more vital to the success of an organization and are indeed the path to a sustainable advantage over competitors. Perhaps employee-centric companies, on the other hand, are at a disadvantage. The rise of artificial intelligence and/or the decrease of employees in favor of contractors may also be tempering the value of employees in the eyes of practitioners and academics. Further research is needed to explore the causes of the bias, as well as potential differences in emphasis among individual companies or types of companies, industries, and even countries or cultures.
Nevertheless, a distinct emphasis on customers over employees is documented in this study at both the practitioner and academic levels. Business leaders should be aware of the potential for bias towards customers, and the relative lack of attention paid to employees, no matter what might be stated in their corporate communication. Mission statements and value statements that tout the importance of both customers and employees will be ineffective if executives and board members believe, consciously or unconsciously, that customers and not employees are key to the success of the organization a belief quietly reinforced by the business literature they read.
Nandil Bhatia’s profile at Columbia Business School
https://academics.gsb.columbia.edu/node/1574
Stephan Meier’s profile at Columbia Business School
https://business.columbia.edu/faculty/people/stephan-meier
Are Customers 10x More Important to Firms than Employees? Nandil Bhatia and Stephan Meier. Academy of Management Journal (July 2023).
https://journals.aom.org/doi/abs/10.5465/AMPROC.2023.10554abstract
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