Customers and employees represent two critical stakeholders of a firm. In most organisations, customer-related activities are under the purview of marketing, while employee-related activities are under the purview of human resource.
The results of the study showed that the relative consistency with which a company treats its customers and employees could affect the company’s long-term value.
Improving consistency in employee and customer achievements can lead to a big change for a firm both financially and metaphorically.
Also, the customer — and employee — related achievements could have a positive impact on a firm’s valuation while the lapses can strengthen the negative impact.
Companies that have consistency in employee and customer achievements on average have 11 percent higher firm valuation than those having inconsistent outcomes.
“Our results imply that CEOs need to ensure that critical members of the C-suite coordinate their activities to maximize firm value,” the researchers maintained.
The findings also revealed that the effect of uniformity in customer and employee related activities are stronger for firms with a narrow than a broad business scope.
“We found these results to be much stronger for firms with a narrow than a broad business focus; that is, competing in fewer than more business segments,” said Yan “Anthea” Zhang, the Fayez Sarofim Vanguard professor of Management at the Rice Jones University in Texas, US.
To achieve this oneness, it is critical for firms to ensure that their marketing and human-resource departments act in unison, the researchers asserted.
The authors found evidence to support their theory using a dataset of 21,447 observations between 1994 and 2010 that represented 4,643 firms.
