Why customer excellence depends on engaged people and high engagement depends on great and leadership and management

In a low-growth market, the difference between surviving and thriving increasingly comes down to one simple equation:

Excellent Customer Experience = Engaged Employees + Skilled Leadership and Line Management 

This causal chain isn’t just intuitive as UK research and international studies show it, quantify it and make clear where organisations should focus their effort if they want sustainable commercial returns while the wider economy remains flatlining.

The economic backdrop: growth is weak, so every customer interaction matters

The UK’s economy in recent years has been one of modest growth. Official statistics show our growth domestic product (GDP) barely moving in some quarters and forecasts from independent forecasters and the Office of Budget Responsibility(OBR)/Bank of England pointing to only modest expansion in the near term. This is a reminder that businesses can’t rely on a rising tide to lift all boats. In that environment, winning repeat customers and extracting more value from existing customers becomes essential to revenue growth. 

The first link: engaged employees deliver better customer outcomes

A large body of evidence shows a clear and measurable connection between how engaged employees are and the service customers receive. The Institute of Customer Service’s work (along with other related industry analysis) have quantified that link: for every 1-point improvement in employee engagement there is roughly a 0.41-point rise in customer satisfaction (as per the Institute’s Customer Satisfaction Index). That is a direct, operationally useful relationship: small practical lifts in engagement often translate into meaningful improvements in customer experience scores. 

Why does this happen? Engaged employees are more motivated to go the extra mile, less likely to make avoidable mistakes, more willing to take ownership of problems, and more consistent in the tone and commitment they bring to customer interactions. Those behaviours add up: fewer complaints, faster resolution times and stronger loyalty. These all feed through to better top-line and margin outcomes. The Institute also links higher customer satisfaction to stronger commercial metrics such as turnover growth and profit per employee (see here).

The second link: engagement is driven most strongly by how people are led and managed

Employee engagement doesn’t happen by accident. The single biggest organisational lever is the quality of leadership and, especially, the role of the line manager. Multiple UK studies find that employees who rate their immediate manager highly also report far stronger engagement, wellbeing and intention to stay. The CIPD’s research and the Engage for Success surveys point to the same conclusion: line managers’ behaviours, including clarity of expectations, coaching, and day-to-day support, have a substantial and causal impact on engagement scores.

That’s important because recent global work from Gallup shows manager engagement itself is slipping and manager disengagement is contagious. Gallup’s State of the Global Workplace research flagged a worrying drop in engagement among managers, which in turn depresses team engagement and performance. In short: if managers aren’t supported, trained and held accountable for people leadership, the whole chain towards customer excellence weakens.

A snapshot of the UK situation (numbers that matter)

• Employee engagement: Different measures exist but the picture is mixed and concerning. Engage for Success’s UK Engagement Index sits around the low-60s (62%) on its composite measure, indicating many employees are “present” but not fully engaged. By contrast, Gallup’s international benchmarking reported UK engagement at a very low single-digit/10% level in its global workplace work — this difference reflects different survey methods and definitions, but both sources point to stagnation and substantial room for improvement. The key takeaway is consistency of the message: large parts of the UK workforce are not highly engaged.
• Cost of low engagement: Gallup and reporting outlets estimate hundreds of billions of pounds of lost productivity in the UK linked to low engagement (figures have been reported in the range of c£250–£300 billion annually). That’s not a hypothetical accounting exercise; it’s lost sales, wasted hours, higher turnover and avoidable service failures. See summary from ITN Business by clicking here.
• Customer satisfaction: The Institute of Customer Service’s UK Customer Satisfaction Index (UKCSI) provides a regular barometer of how customers view service across sectors. The UKCSI is correlated with engagement and demonstrates how improved service performance maps to measurable commercial outcomes.

NB: When comparing different numbers across reports, remember they often measure different things: employee sentiment in organisation-commissioned surveys can differ from independent national samples, and “engagement” is not an entirely standardised metric.

Why leadership and line management should be the priority investment

If the causal chain is: leadership = employee engagement = customer outcomes = commercial results, then interventions that strengthen leadership and line management effectiveness are high-leverage investments. Why?

1. Managers translate strategy into daily experience. Senior leaders set direction, but line managers make strategy lived and felt in every shift, call and customer interaction. Training and coaching them pays off quickly in more consistent service delivery and better staff retention. See: CIPD for reference.
2. Manager behaviour moderates wellbeing and presenteeism. Poor management is linked to increased sickness, burnout and presenteeism and these outcomes directly erode customer experience and productivity. Improving manager capability reduces these risks and the associated hidden costs. See: The Guardian for information.
3. Manager support increases discretionary effort. When employees feel their manager listens, develops them and removes blockers, they are more likely to put in discretionary effort that surprises and delights customers. These are the very moments that create loyalty. See: Institute for Employment Studies (IES) for reference.

Practical steps for leaders who want to close the loop

If you’re a business leader reading this and thinking “where do we start?”, here are pragmatic priorities that link to evidence:

• Measure the right things: use employee engagement surveys that include manager-level diagnostics and tie results to customer metrics (e.g. linking engagement scores with UKCSI or NPS at team level). The Institute of Customer Service’s work shows direct mapping between small engagement gains and CSI improvement — measuring both lets you see ROI.
• Invest in line manager capability: coaching, time for people work, clear expectations and accountability for team engagement. CIPD evidence shows manager quality is a central determinant of employee wellbeing and engagement. CIPD
• Connect employee purpose to customer outcomes: make it explicit how day-to-day tasks affect customers and the business. When employees see that link, employee engagement and discretionary effort rise. (This is consistent with the drivers identified in longstanding engagement research.) Reference: Institute for Employment Studies (IES)
• Use small experiments and scale what works: pilot manager coaching in frontline teams, track engagement and customer scores, then scale proven interventions. The employee engagement-to-customer link means you should see measurable customer improvements from relatively focused people investments. See: djsresearch.co.uk for information.

The strategic payoff

With the UK economy currently offering only limited growth headroom, organisations that can consistently deliver superior customer experiences, without proportionally increasing costs, will win. That’s achieved less by large, expensive marketing campaigns and more by sustainably improving the human systems that determine everyday service: motivated employees supported by capable managers. The evidence is clear: better management leads to higher engagement, which drives better customer outcomes and, ultimately, stronger commercial performance.

Summary

Our mantra at Beyond Theory has always been and remains, ‘Look after your people and they will take care of your business’. This is not just ideology; it is business common sense.

Paul Beesley

Director and Senior Consultant, Beyond Theory