When customer-facing employees are paid more, do customers receive a better experience?
According to McDonald's CEO, the answer is "Yes."
“We know that a motivated work force leads to better customer service, so we believe this initial step not only benefits our employees, it will improve McDonald’s restaurant experience,” said Steve Esterbrook, CEO of McDonald's, according to an article in the New York Times.
When employees are paid more, they're more likely invest more discretionary effort into their work; they're willing to go the extra mile. A 2013 study by human resources thought leader Aon reveals that pay is a key driver for employee engagement. For a customer-facing employee, this may mean working a little harder; trying a second time to satisfy a customer. The added discretionary effort can turn the corner for the customer from merely satisfied to delighted. And delight drives loyalty.
When employees are paid more, their attitudes improve. They're more positive, and this comes across in their demeanor with the customer. Higher pay reduces financial stress. While research indicates that a more positive attitude can reduce stress, the inverse is also true - reduced stress allows a better attitude to happen. A customer can smell a bad attitude from a mile away and a positive attitude from two miles. People tend to be drawn toward positive people, and away from negative ones. Positive employees attract more customers.
When employees are paid more, they stick around longer; they're less likely to move to another employer for incrementally higher pay. As a result, the work for as a whole becomes more experienced. And greater experience brings greater knowledge, more confidence in doing the work, and a reduction in training and hiring costs. As HBR points out, there are indeed high costs associated with low wages, and frequent turnover is just one of them.
There are plenty of systemically good reasons to invest more in front-line employees - those who most directly interface with the paying customer - but perhaps the most strategically sound reason of all is to improve the customer experience. Greater customer experiences lead to greater customer loyalty, an higher revenue and profits.