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Beyond the labor shortage: poor work ethic and declining customer satisfaction.

Despite the increasing rhetoric about valuing customers, customer satisfaction is actually declining in the U.S. Experts say that on average, U.S. companies manage to lose half their customers every five years. This could be attributed to higher customer expectations or increased choices for customers. Some suggest it could be due to the tight labor market, which has made it harder to find and retain the quality employees who can keep customers coming back (Hawk, 1999).

For all practical purposes, we are living in an era of full employment. The economy is in the longest peacetime expansion ever, having created two million jobs in 1998 (Providence Journal, July 5, 1999). The obvious implications of this are 1) the immediate shortage of help for even entry level positions and 2) the difficulty in finding skilled or trained applicants for more technical jobs. A less obvious by-product has only recently come to light--the attitude of the work force--as those previously unemployed or even unemployable move into the labor force. According to one Associated Press story, "Dropouts, unskilled minorities, people with disabilities, seniors--those who traditionally are unwanted or who get the worst jobs are suddenly wanted" (Providence Journal, May 23, 1999).

New studies examine the opinions of employers as they assess their work force--its strengths and weaknesses as well as the outlook for the future. These studies reveal a problem with the work ethic of those currently in the labor force. This issue of work ethic or worker attitude is cited by employers more often than drug problems, need for childcare, need for transportation, or the lack of fluency in English.

During the summer of 1999, the University of Massachusetts, Dartmouth, conducted a labor study for one of the state's sixteen regional employment boards. A survey design was selected as the most appropriate for data collection. The final questionnaire included demographic information on all businesses in the study as well as the SIC codes.

Three hundred and eight human resource directors, or those responsible for hiring, and representing eight government classifications, were queried regarding their opinions on the current labor force, the potential availability of new positions, and the possibility of wages increasing in the near future. As in most such surveys, employers bemoaned the dearth of qualified help and the competition for workers. The response that proved most surprising was the citing of work ethic as the most common problem. Over 40% of all human resource directors gave that response (Barnes, 1999).

Work ethic was cited as the number one problem across all industries studied; they included agriculture, construction, manufacturing, transportation/communications, wholesale/retail, finance, insurance, government and services. It was also the most often cited problem across all ten geographical regions studied. (See Figure 1.)

Examples of this were offered and usually referred to a worker's unfriendly attitude, laziness, and tardiness or absenteeism. The results of the study were met with strong words from area legislators and those in economic development. Many denounced the results as "inconsistent" with studies of a decade ago touting the strong work ethic among the area's employees (Stewardson, 1999).

Less than two months later, in the fall of 1999, the University of Memphis, Bureau of Business and Economic Research (BBER), released the results of the Labor Market Study. Using a survey similar to the University of Massachusetts study, 170 businesses were contacted; 120 responded. Many survey questions in the BBER study focused on attributes of entry-level workers. Specifically, employers were asked 1) what they look for in a job applicant, 2) what they find in the job pool, and 3) how they rate their current entry-level workers.

Employers of all sizes and industry types agreed on the most important attribute of job applicants: 97% indicated "having a good attitude" was the number one quality they sought. Again, attitude came before being drug free, having no criminal record, and other barriers to employment. When asked to describe the strengths and weaknesses of job applicants, "poor work ethic" or "poor attitude" was cited most commonly. Forty-one percent of respondents said their businesses suffer significantly from employee absenteeism attributable to poor work habits (Buchner, 1999).

In the fall of 1999, a number of other reports on the same subject were published. The University of Michigan released its survey of customer satisfaction. The American Customer Satisfaction Index (ACSI) is a national economic indicator of customer satisfaction with the quality of goods and services available to household consumers in the United States. It is compiled and analyzed by the University of Michigan Business School's National Quality Research Center. The ACSI uses a 100-point scale; the findings were that customer satisfaction at fast-food restaurants, retailers, gas stations, and banks has fallen to its lowest level since the survey began in 1994. (See Figures 2a and 2b.)

[FIGURE 2 OMITTED]

As unemployment has fallen, customer satisfaction has plunged. Department and discount stores, as well as banks, have ACSI scores lower than the national average, and these have been declining since 1994.

During the same time period, the Society of Consumer Affairs Professionals in Business found that Americans now consider prompt, courteous, and efficient customer service a prerequisite for continued brand loyalty (Clement, 1999). Further validation of the importance of customer satisfaction came from the Metro Atlanta Chamber of Commerce. The chamber surveyed 40 Georgia firms in eight key industries and concluded attitude was more important than aptitude. The study quotes one human resource director as saying, "We can teach programming, but we can't teach personality and motivation" (Joyner, 1999).

In a national study of business professionals by ETICON, Inc., 80% of respondents reported a significant increase of rudeness in business, involving lack of a positive attitude, good manners, and civility. The problems most often cited were telephone rudeness, indifference and inattentiveness, ignoring waiting customers in order to conduct private conversations, not responding in a timely manner, and inappropriate tone or language (Clark, 1999).

There is some apparent difficulty as these industries try to balance an increase in productivity with customer service. Cost cutting and downsizing may help the bottom line, but will inevitably result in customer dissatisfaction as service and assistance become harder to obtain. The current lack of strong applicant pools only complicates the issue. As quality hires grow more and more scarce, managers find they must teach the most rudimentary manners. Consumers meanwhile are becoming increasingly impatient with their treatment at the register.

The convergence of the above-mentioned findings of the Universities of Massachusetts, Memphis, and Michigan, and the studies done by national and professional groups around the country, is unsettling. The real labor crisis may not be just in the number of employees, but the attitude of those currently working.

How do employers in a tight job market find and retain good employees? Some recruiters are trying new strategies. Target installed kiosks in the front of its stores where prospects can fill out computerized applications and be on the job in 24 hours. The quick turn-around time may help secure a better prospect who would be lost in a slower process. Wal-Mart is now extending medical benefits and 401(k) savings plans to part-timers. Home Depot spent millions on its first national TV help wanted ad, which appears to have been very successful in generating an increased number of applicants.

The implications are clear. To minimize the likelihood of hiring unsatisfactory employees, employers must reexamine the process. Several steps must be taken.

1. Increase the applicant pool--Advertising, working with social service agencies and establishing a relationship with local schools, colleges or universities can help provide choices for employers. The larger, more diverse job pool should help to alleviate the hiring of an unsatisfactory candidate just to fill an open slot.

2. Make hiring decisions quickly--In a competitive job market, time is of the essence. Applicants will take offers as they come, knowing they can always change jobs should one not work out. The target strategy of the 24-hour decision is a model that has many potential applications. The convenience of a quick response time is usually appreciated and might help secure a valuable prospect before other employers get involved.

3. Offer something extra--Jobs will need value-added components. Whether it be salary benefits, discounts or rewards, jobs just as products, must be packaged in some attractive way. Signing bonuses are now common. Employers need to consider both intrinsic and extrinsic incentives to secure new hires and keep them.

4. Make attitude training as important as job training--Basic manners and customer interaction skills must become an integral part of all new employee orientations. Bad employees, as much as a shortage of them, can lead to unhappy customers and lost revenue. Issues such as absenteeism, lateness, and laziness must be addressed and avoided. Some employers (for example, McDonalds and IBM) believe grades and school attendance records indicate whether applicants will be reliable employees. They now ask to see high school transcripts with job applications (Providence Journal, August 20, 1999).

5. Survey employees to determine the source of their discontent--Unlike past generations, employees of the 90's don't sign on to a job for life and commit their loyalty unconditionally. If they don't feel satisfied in their workplace, they leave. It may be that worker attitudes have to do with morals and perceptions of their work environment, which can be addressed. Sensitivity toward worker discontent might translate into high customer satisfaction.

If the above strategies prove ineffective, consideration should be given to an alternative approach: do nothing. Certainly economic conditions will change over time and some businesses will be able to wait it out. It may be possible to reduce the demand for new employees by restructuring jobs, outsourcing jobs, or relocating to an area with a less restricted labor pool if one exists. These approaches risk having an impact on productivity and profitability (Buchner, 1999).

Having good employees and high customer satisfaction pays dividends. There is evidence that customer satisfaction has an impact on profitability. A second study by the Society of Consumer Affairs Professionals in Business found 90% of consumers with favorable customer service experiences would continue to buy while 37% would not remain loyal if customer service were poor (Clement, 1999). The ETICON study cited earlier in this paper, reported that 60% of unsatisfied customers would take their business elsewhere.

The University of Michigan's Consumer Satisfaction Index was the focus of a Wharton School (University of Pennsylvania) study that attempted to correlate customer satisfaction with stock market values. The investigators discovered that a one-unit change in customer satisfaction ratings, measured on a scale of 1 to 100, translated on average to a $250 million change in stock market value per company (Hawk, 1999).

While these studies are helpful, they take a one-shot approach to examining the link between customer satisfaction and some performance measure. The results are strengthened by one of the most recent customer satisfaction studies, which took an alternative approach.

Rust and Zahorik advocated using longitudinal data when examining customer satisfaction and performance (1993). The reasons for this are obvious to academics and practitioners. At any given point in time, an array of factors could cloud the relationship. For example, repaving a parking lot or adding a drive-through window could ultimately increase customer satisfaction. However, in the short run, both cost money and will negatively affect profit margins during that time period. Conversely, on a hot summer day customer turnout at retail stores might be low causing low profits, but customers may in fact have high satisfaction.

A newer study took a longitudinal approach and examined thousands of customers repeatedly over a 12-month period of time. It concluded that the impact of an increase in customer satisfaction on profits, although obscured in the short run by many factors, is significantly positive in the long run (Bernhardt, 2000). The implications are clear. Management should exercise patience in evaluating the impact of customer satisfaction efforts. Further, recognizing the relationship between customer satisfaction and profits should help justify investments in recruitment and training.

It is now obvious that American businesses are facing a shortage of qualified employees. Beyond that, worker ethic or worker attitude appears to be having a negative impact on customer satisfaction. For now, the war for workers is fiercer than the battle for customers. If the issue of worker attitude or work ethic is not addressed, employers stand to lose both the battle and the war. Inevitably, the quality of the worker will impact the future viability of the business.

References

American Consumer Satisfaction Index (ACSI). University of Michigan. http://www.bus.umich. edu/research/ngrc/q4-99-ci.html.

Barnes, N.G. (1999). Identification of Critical Industries, Occupations, and Skills Sets. New Bedford, Massachusetts: Greater New Bedford Regional Employment Board.

Bernhardt, K. (2000, February). A Longitudinal Analysis of Satisfaction and Profitability. Journal of Business Research, v. 47, 2, 161.

Buchner, M. (1999, October). The Critical Need for Workforce Development. BBER. The Memphis Economy. University of Memphis.

Clark, S. (1999, December 10). What Happened to Being Considerate? Orlando Business Journal, v.16, 28, 27.

Clement, J. (1999, December 10). Payoffs in Pleasantries. LI Business News, v. 46, 50, 21A.

Hawk. (1999, June). The Right Stuff. Management Review, 43.

Hot Job Market Open to Almost All Workers. (1999, July 5). The Providence Journal, A4.

Joyner, T. (1999, November 18). Employers: 'People' Skills Most Important. The Atlanta Constitution, C1:2.

Low-Wage Workers Are In Demand. (1999, May 23). The Providence Journal, C3.

More Companies Seeking High School Transcripts. (1999, August 20). The Providence Journal, A6.

Rust, R. & Zahorik, A. (1993, Summer). Customer Satisfaction, Customer Retention, and Market Share. Journal of Retailing, 193.

Stewardson, J. (1999, August 19). Area has Lost Vaunted Work Ethic, Study Says. New Bedford Standard Times, A1.

Nora Ganim Barnes Chancellor Professor University of Massachusetts Dartmouth North Dartmouth

Colleen E. Powers Department of Marketing/BIS University of Massachusetts Dartmouth North Dartmouth
Figure 1

Problems with Existing Workforce

Fluency in English 7.10%
Need for Child Care 15.60%
Drug History/Use 4.20%
Work Ethic 42.90%
Transportation 3.60%
Other 15.20%
More than One 4.90%

Source: Identification of Critical Industries, Occupations, and Skill
Sets, 1999

Note: Table made from bar graph.
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Author:Barnes, Nora Ganim; Powers, Colleen E.
Publication:Business Forum
Geographic Code:1USA
Date:Mar 22, 2006
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