Gallup has identified and validated a set of eight elements from its database of employee and customer interactions, including 300,000 business units around the world. This Microeconomic path, a behavioral model for organic sales growth, is the most advanced meta-analytics ever on the subject.
Step One: Stock Price (Business Value) Increase
The first of eight steps on the Gallup Path is stock increase for public companies. Behavioral economics plays a role here with profit leading to an increase in stock price. Gallup discovered that profit increase predicts share increase about 80% of the time.
Step Two: Real Profit Increase
Real sales growth predicts profit increase about 80% of the time.
Step Three: Sustainable Growth
There are many methods of increasing profit and therefore stock price. However, authentic, sustainable profit and stock growth are most likely to occur as a result of real sales growth, especially when sales growth is organic instead of acquired.
Step Four: Engaged Customers
The next logical question based on behavioral economics is what leadership activity or behavioral economic variable best predicts real sales increase? The answer is high customer engagement.
Gallup scientists call it customer engagement rather than customer satisfaction because feeling satisfied doesn’t reliably predict buying more or buying more often. Being engaged is a better predictor of sales growth. The significant discovery Gallup made is that when customer engagement increases, sales increase.
Step Five: Engaged Employees
The next question leading to the next step on the Gallup Path is: “What causes a customer to become engaged?” The short answer is they have high trust in your organization. For business to business companies, engaged customers will say that you are a trusted advisor, that you understand their business, and that you have made a significant impact on their performance.
As we have worked our way down the first five steps on the Gallup Path, we see that customer engagement drives sales growth and stock price (or business value) increase, and employee engagement drives customer engagement. Thus, the most powerful behavioral lever to pull is increasing the number of employees who are engaged. This means the focus must be on increasing the energy at the intersection of employees and customers. Gallup emphasizes—not either one alone; the energy is in the intersection because engaged employees create customer engagement, which creates sales growth, which creates profit increase, which finally, creates stock (or business value) increases—and everybody wins.
Steps Six, Seven and Eight: Identify Strengths, The Right Fit and Great Managers
Clifton and Harter make the claim that to make all this work perfectly, organizations must focus on strengths—the ability and capacity to provide consistent, near-perfect performance in a given activity—of every employee. They continue,“There is one behavioral economic demand left, and it is the biggest. If you don’t get this one right, everything else falls apart.
“Once you have diagnosed an individual’s strengths and given them a near-perfect job fit in which they have a natural capacity to perform, make sure they have one of the world’s great managers.
“Everything else on The Gallup Path shuts down if an employee has a bad boss.
“If you give every team member in your company a great manager—a great team coach—one who cares about their development and growth, you have successfully engineered an organization with unlimited potential.”
Clifton and Harter leave us with this final word, “It’s the manager.”
(It’s the Manager, page 186)
The next issue of The Effectiveness Coach Presents begins a new series, Mastering Your Inner Game: Transforming Yourself from Overwhelm and Confusion to Confident and Impactful.
Get Your Copy of Clifton and Harter’s book, It’s the Manager.
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