Most businesses understand the importance of providing quality customer service. In fact, a recent survey of business leaders by Purdue University’s Center for Customer-Driven Quality found that nearly 70 percent tabbed the customer experience as the most important factor in building satisfaction and loyalty, ahead of even price and quality. Despite this fact, one of the most common and growing consumer laments is that businesses don’t pay as much attention to service as they did in the past. The numbers seem to back up that perception. According to the Better Business Bureau, consumer complaints against retail stores alone rose 104 percent between 2000 and 2003.

There are a number of theories on what’s behind declining customer service. Some have blamed the problem on a shortage of skilled workers, others on the apathy of younger employees. Recently, however, many experts have suggested that poor customer service may be the product of workplace practices, chiefly a lack of training for front-line workers and low employee satisfaction.

There already appears to be some improvement on the training front. According to the American Society for Training and Development, learning expenditures for customer service personnel saw the biggest two-year jump between 2001 and 2003. The International Customer Service Association saw a 10 percent increase in sales of its CD-ROM-based certification program in 2004.

Over the last few years, Winning Workplaces has profiled a number of small businesses that have leveraged training to boost their customer service, giving them a competitive advantage in their respective industries. Take, for example, two organizations that were honored last October as part of our “Best Bosses” recognition program: Small Dog Electronics and Baird & Warner. In the case of Small Dog Electronics, an Apple Computers reseller, preparing their people to provide top-notch service has helped them survive in a progressively tougher market. The company not only faces stiff competition from other retailers but, in recent years, from Apple itself. While Small Dog strives to offer a competitive price, more often than not the difference between keeping and losing customers rests with the service it provides. In order to stay ahead of their competitors, the company provides all employees – from shipping to customer service to management – with training to become certified Apple Product Professionals. By ensuring all employees possess a high level of technical expertise, Small Dog ensures consistently strong customer service regarding any issue that might arise.

Similarly, real estate company Baird & Warner has managed to keep turnover low and remain independent in a rapidly consolidating industry by emphasizing learning and development. The company employs an extensive training program covering everything from financial management to recruiting new associates. More importantly, they have used training to set common expectations across all 35 of their offices and to standardize their service to buyers and sellers. Every policy change and new program is carefully scripted by Baird’s executive team and the managers. There’s a buyer’s script, a seller’s script and a cold-calling script, leaving little to chance. As a result, no matter who walks into a Baird & Warner office, they all get the same message.

Unfortunately for many companies, high turnover and a lack of buy-in on the part of workers who have not traditionally felt they had a stake in their employers’ success have proven to be an impediment to effective training. In other words, employee satisfaction is an important antecedent of high-quality customer service.

A recent joint study by Purdue business professor James Oakley and Northwestern University’s Forum for People Management & Measurement lends credence to this idea. The study, entitled “Linking Organizational Characteristics to Employee Attitudes and Behavior,” found that there is a direct correlation between employee satisfaction and customer satisfaction. The survey of 5,568 employees at 90 organizations and 37, 036 of their customers, found that organizations with high levels of employee satisfaction were more likely to have higher levels of customer satisfaction. More importantly, they found that organizations with high employee and customer satisfaction levels enjoyed better financial results than their competitors.

This should come as little surprise. Poor customer service costs money. The costs of reacquiring a dissatisfied customer or marketing to new customers are considerably higher than servicing returning customers. And whereas a negative reputation can drive people away in droves, word-of-mouth referrals from loyal customers are not only a cheap but effective source of new business.

What’s interesting about this study is that unlike similar research on the relationship between employee satisfaction and customer service, this survey examined the attitudes of employees who do not normally interact with the public, a much larger demographic. The results suggest that customer satisfaction is often the product of an effective workplace culture, one which emphasizes employee satisfaction. In particular, it found that an atmosphere of open communication was the greatest predictor of employee satisfaction.

The study revealed that satisfied workers were more engaged and more likely to provide a voice for the customer within their respective organizations, regardless of their role. They understood how their work impacted the customer and, ultimately, their companies’ financial success. In short, the most successful organizations in the study had created a service culture, one in which everyone from manufacturing to logistics to customer service were dedicated to satisfying the customer.

Ultimately, customer satisfaction is a leadership issue. The companies that succeed in this crucial area are the ones that have created a service culture, and a service culture begins with how you treat your employees. Organizations that prepare their employees to provide high-quality service, communicate openly and honestly with them, and empower them to make decisions enjoy a competitive advantage. After all, unless you have cornered the market on a particular product or service, your business will compete on quality, price, and yes, customer service. Those that recognize that the role of a leader is to serve their organizations and their stakeholders, not the other way around, are the ones who are most likely to succeed.