Customer and employee engagement are straightforward concepts. Fully engaged customers, for example, are so psychologically connected to the companies they do business with, they'll often go out of their way to get to their favorite outlet, bypassing its competitors along the way. Engaged employees are highly productive and committed because they feel a deep emotional attachment to their work. What's more, engaged customers and employees help companies deliver better financial performance.

But companies can realize greater -- and more rapid -- gains in performance when these two powerful concepts are brought together onto a single platform called HumanSigma. HumanSigma is a management approach and metric that examines the combined impact of employee and customer engagement at a local level within an organization. An optimized workgroup, one in which workers and customers are deeply engaged with the company, not only has a high HumanSigma score, but it also returns significant business benefits to the organization -- benefits that are exponentially better than focusing on either employee or customer engagement alone.

Improving HumanSigma performance, however, requires disciplined hard work and isn't always easy. It may require a company to reorganize to better align itself with HumanSigma management principles. Or it may require the company to transform itself by finding new ways to do things while learning to do the things it already does better. Or it may require the organization to rethink some of its core assumptions.

Two professors, William Baker, Ph.D., of San Diego State University, and James Sinkula, Ph.D., of the University of Vermont, suspect that they know what at least a few of those assumptions may be. "A company could have a false sense of security that it's doing what it's supposed to do: looking at customers, looking at competitors, looking at employees, doing research, and basing strategy on research findings," says Baker. "But if they're not learning correctly, they could be basing what they do on a set of false assumptions."

And false assumptions can throw a business seriously off course. A perfect, and perfectly ironic, example of this is Encyclopædia Britannica, Inc. The company has been publishing its celebrated encyclopedia since 1768, and it has continued to build on its success in the succeeding centuries. But Encyclopædia Britannica stumbled in the 1980s, as emerging technologies increasingly drove knowledge sources online. Customers saw no need to buy 32 heavy books when they had access to information on the Internet. Encyclopædia Britannica could have gone under.

"They stayed an encyclopedia company too long," says Baker. "[As] an encyclopedia company, they could do everything right: monitor their customers and the competition, make improvements to encyclopedias. But they still missed the bigger picture."

Though right in the office they had "the sum of human knowledge," as the company's ads once touted, they no longer understood the market. What saved Encyclopædia Britannica was a new owner who not only injected cash but also changed the company's definition from being a publisher to being a "leading provider of learning and knowledge products." "They shifted from a narrow view of being an encyclopedia company," says Baker, "to a broad view of being a knowledge company." In other words, Encyclopædia Britannica changed its market orientation.

A market-oriented culture

Market orientation is essentially a philosophy for using market-based information "as a major tool in the strategic decision-making process," says Baker. A market-oriented company knows its customers' preferences, the environmental factors that influence customers, its relative abilities to satisfy customers, and what the competition is doing.

Sinkula and Baker's research turned up an interesting fact about market orientation: Young companies tend to be better at it than established organizations. "Smaller, younger organizations acquire less market research information, but they use it more," says Sinkula. "Maybe it's because they have more to learn, and market information is more precious to them. As organizations grow and become successful, they tend to become acquiescent and put information acquisition on auto pilot."

Many companies believe they use market information well, but organizations that really aren't market-oriented don't do it right. "They routinely listen to what consumers have to say," says Sinkula. "They survey consumers and follow consumer demands, but they do that in a mechanistic way." Their shortcomings include: asking survey questions that sound good but don't get at the customer's level of emotional attachment, asking questions because the company knows it's supposed to ask them, or failing to evaluate customer feedback.

But even companies that genuinely listen to customers may not handle the next step effectively. Market orientation is more than just obtaining information -- it's about using it to gain competitive advantage. A market-oriented company doesn't just get the right information -- it gets it to the right people and responds to it in the right way.

What prevents that right acquisition, dissemination, and responsiveness to market information, say Baker and Sinkula, are rigid mental models and management arrogance. A company that is too sure of what it currently is to care about what it could be, or a company that is so sure it's impregnable that it doesn't check its defenses is not market-oriented and is thus vulnerable.

Copyright Ó 2007 The Gallup Organization, Princeton, NJ.  All rights reserved.  Reprinted with permission.  Visit The Gallup Management Journal at http://gmj.gallup.com/

Article from The Gallup Management Journal