Microsoft’s global executive and author of LOYAL: A Leader’s Guide To Winning Customer And Employee Loyalty, Aaron Painter is our featured guest in today’s show.

Currently based in China, Aaron leads a broad team of sales, marketing, product, and partner management professionals. So, if you’re a business leader, an executive, or an employee, you don’t want to miss Aaron’s advice for managing evolving expectations in today’s workforce.

By the end of this episode, you’ll know how to sustainably grow your business through employee engagement. Because loyal employees attract loyal customers.

Listen in to Aaron Painter to learn:

  • The difference between hearing what your employees say and really listening to them
  • How to attract loyal customers through employee engagement
  • The fastest way to build trust in a diverse, multicultural workforce

What was your experience moving to China like?

I still remember my first day of work in China about five years ago. I had moved over there on a Saturday and started working on a Monday. Just as I did at any other office, I aimed to be at work for 9 a.m.

Well, traffic in Beijing is a disaster, so I didn’t get to the office until 10 a.m.

Early morning traffic congestion.

The first thing on my agenda was a meeting with my manager. He outlined the current situation and reminded me of where our business unit’s focus was. I remember walking away from that meeting feeling super excited.

Often times when you move somewhere new everything is exciting and different at first and there’s just a ton energy around that. Then, weeks, or sometimes months, later you start to see the challenges a bit clearer.

In this case, the challenges became clear to me before the end of the first day.

I walked out of my manager’s office around 11 a.m. and immediately thought, “Alright. Where can I begin? Who can I learn from? Who can I reach out to to dive deeper into some of the things that I need to know for my job?”

It was over the course of that discovery process during that first afternoon that I came to the conclusion of, “Whoa! This is going to be a really big challenge. I’m up for it, but it’s going to be a really big challenge.”

What was your first assignment with Microsoft China?

I had two core objectives when I agreed to lead Microsoft’s business unit in China.

The first was to build a more sustainable business for Microsoft in China.

We had a lot of Office and Windows users but not very many of them had actually paid for those products.

Essentially, our users would find pirated versions and download our products which, on the one hand, was great. We were so happy that they liked the products and wanted to use them, but we’re a for-profit company and so at some point monetizing those products becomes pretty important.

“The reality is that technology at Microsoft has changed a lot and we don’t just make things like Office and Windows anymore.”

We make a lot more sophisticated business enterprise software and cloud computing services. The kind of tools that most companies rely on for their core business functions. But because of the piracy issue and the experience that most of our customers in China had with Microsoft previously, they didn’t really think about us when they needed those kinds of solutions.

They often thought about other companies and went to them first for their technology needs, not to Microsoft.

The root of the problem lay in how our customers interacted with us in the past.

The experience that they had with us was very transactional before. A salesperson would call them and say, “Hey, we see you have this number of employees and they probably all have a computer. Therefore, you probably need to buy this many copies of Windows.”

But the customer was already using Windows. They didn’t feel the need to pay for something they had already been using. It was almost like a tax. It wasn’t at all about us trying to understand what their business needs were to find new ways to help.

How did you go about solving Microsoft’s piracy problem in China?

First, I set out to meet our customers and talk to some of our managers to try and learn as much as I could about our operations in China. I called it a listening tour.

I still remember meeting with my first customer; they were a manufacturer. They told me that their business was doing really well but that over the years they were facing more and more competition and that the pace of change for manufacturers in China was accelerating.

When they first started they had 20 or 30 competitors and now they were competing with hundreds of other manufacturers in certain areas. They were genuinely worried about losing some of their customers and were finding it harder to differentiate themselves from the new competitors that were popping up.

They knew that they had to innovate or risk becoming obsolete. They wanted to make new products, but as their existing customers weren’t always coming back to them, they felt like they weren’t plugged in; they felt like maybe they weren’t listening as well as they could be, and that they were missing valuable feedback from their customers.

It immediately dawned on me that the challenges facing this manufacturing company were very similar to those facing Microsoft in China at the time.

As I met with more and more customers, I realized that it the issues facing these companies were super consistent across a lot of different industries. I found the same problems in retail and in logistics and distribution, even banking and financial services customers were struggling to understand their customers.

“What they all needed was customer loyalty. These businesses needed customers that would come back and think of them as their first choice when they had a need that these businesses could meet.”

Does customer loyalty differ in China compared to North America?

I usually segment countries or markets in the world into two categories: building markets and refining markets.

A building market is a market that lacks a specific product or service. For example, maybe there’s a market that doesn’t have access to denim jeans. Well, someone might then create a company that brings jeans to that market and can manufacture them. Essentially, you’re creating something that wasn’t there before.

As a business leader, that’s a lot of work and really hard to do.

The other side of that equation is the refining market. A refining market is a market where all of the factors of production are in place, but there are improvements you can make. Maybe slightly tweaking the way something is sold or tweaking the packaging or improving the customer sales experience in a retail store.

You’re not bringing anything new to market, you’re simply improving on what already exists.

When we often think of emerging or developing markets, sometimes just getting access to a new good or product is really amazing. But if you go to a more developed market, you may say, “Oh, there are tons of people that provide this, but how can I make the experience better?”

To me, branding and brand loyalty really kick in when you enter that refining stage.

China, in many industries, is entering that refining stage where there’s plenty of availability for so many kinds of products, but they’re only just starting to realize the importance of branding and that’s why customer loyalty is typically much lower in China than in North America.

How did employee loyalty come into the picture?

My second primary objective in China was to train and develop Microsoft’s Millennial workforce.

We have a principle that diversity strengthens our company so we have people from a variety of different backgrounds. Of course, we hired a lot of industry and experienced senior people, but we also wanted a lot of fresh talent and fresh graduates from undergraduate and MBA programs who could bring different perspectives and different levels of energy.

We could then teach our team a little bit about the Microsoft way and best practices for the things we do. We also wanted to learn new ways of doing things from them that might make our business in China more successful. At the time we were hiring a lot of people because we were growing so fast.

Microsoft has a long history of being led by people that have solved some really big problems early on in their lives. Bill Gates arguably left college to found the company and Steve Balmer, our previous CEO, dropped out of business school to work in the real world. So, we’ve always had this corporate culture of bringing together people who are really experienced and people that are much earlier in their career.

“The challenge we were having in China was that the Millennials we were hiring weren’t sticking around. We had a very high employee attrition rate compared to our offices in other countries.”

So the issue of employee loyalty became my mission. I set out on my first afternoon to figure out why our early-career hires weren’t staying with us.

How can organizations cultivate loyalty?

Let me tell you my personal story of how I discovered the secret to loyalty.

I had spent a number of years living and working in Brazil. At the time, I was working for Microsoft as a general manager, but I was the first foreigner they had in Brazil. I didn’t speak any Portuguese and not a lot of people there, including many in the office, spoke much English.

I had to find a way to do my job.

Fortunately, Brazilians tend to be very expressive and they use their hands a lot. So I would just sit there and listen, and even though I didn’t speak a word of the language, I could often understand the intent behind what the people were saying.

A woman uses hand gestures during a meeting with colleagues.

I learned a lot from the nonverbal cues and their expressions. More importantly, what I realized going through that experience was that the people I was meeting with and listening to felt incredibly respected because even when they sat down with another Portuguese speaker, that other person was often jumping in and offering their own commentary.

They weren’t really listening like I was.

I was able to develop really strong relationships with customers and with my team members in Brazil simply because I adopted this practice of listening.

So, when I got to China I wanted to test this hypothesis:

“Perhaps the act of listening could be the key to institute a culture of loyalty.”

Can anyone become a better listener?

Absolutely. There are several things that lead to better listening. To me, it really begins with the concept of passive hearing and active listening.

When you hear something—whether it’s street sounds, the phone ringing, or the TV in the background—it’s a completely passive experience.

On the other hand, listening is active by nature.

When you’re listening to someone, not just hearing them but actively listening to them, that means that your attention and your focus is completely centered around what they’re saying and doing.

“Listening means you’ve put your phone away and you aren’t looking at your computer screen.”

But the other deeper side is really about wanting to listen with a sense of curiosity and having a desire to understand someone. Being curious about what someone is saying is at the core of active listening.

How does listening impact the employee–manager relationship?

Let me give you a really practical example of listening versus hearing as manager. A scenario many of us are familiar with.

Many years ago I hosted a meeting where one of the key members of the team was absent. We were about halfway through when this team member eventually shows up. As the manager, I jumped in and said, “Oh, I’m really disappointed that you’re late. Please be on time next time.”

Later on, I reflected on how I handled that situation. I had a long talk with that employee and I learned that there was probably a better way to handle that situation and one that was centered around curiosity and listening.

Now, when someone is late for a meeting, I say, “Welcome. Glad you could join us.” Then I talk to them discretely after the meeting is over.

I might sit down and say, “Hey, I observed that you came in 15 minutes late for the meeting today. It was kind of disruptive because you’re a really important part of the team and you weren’t able to hear the updates from some of your colleagues who shared earlier in the meeting.”

Then I ask the question, “Can you help me understand?” and I pause. It’s a bit of a scary moment because you’re not quite sure how the person is going to react. But I listen to whatever they have to say.

I never know what I’m going to get back, but often times there’s a reason or a perspective that I might not have considered if I had jumped in to chastise them or to embarrass them for being late in front of their colleagues.

By listening to them, I create an opportunity not only to coach and help them learn but also a chance to build a relationship and build a sense of trust with them. In the end, the employee feels incredibly respected that I’m sitting there and trying to listen.

Finally, we usually close on a resolution. I can then say, “Okay. Well, I totally understand, but for the next meeting, if you think you’re going to be late, maybe you could email the team in advance and let them know? Or maybe we could move the time of the meeting to something that’s more convenient so that you wouldn’t have to be challenged by it each week?”

We move to a mutual resolution that’s based on what I’ve heard.

“I firmly believe that the building of any relationship begins with respect because when someone feels respected you can start to build trust.”

Conversations like the one I outlined above help not only the employee to feel respected, but they also help managers to understand the needs of their employees better.

Can you give us an example of a company that’s doing a good job of listening to both their employees and their customers?

There’s one that immediately comes to mind in the U.S. and that’s Warby Parker.

Warby, as some of you might know, is a young startup eyewear company. They’re based in New York, and over the past decade they’ve developed a reputation for challenging the status quo and taking an innovative approach to how they do business, both with their customers and with their employees.

They have a culture inside the company that makes it okay for their employees to be quirky. The result is that Warby Parker is a fun company to do business with.

For example, in weekly staff meetings, new employees are asked to stand up and to share a fun fact or funny story about themselves. It’s a really vulnerable moment, deliberately so, because the company wants to foster the perception that being a bit odd and a bit quirky is acceptable and encouraged.

“The expression of vulnerability is really an incredible way to build trust amongst a team, and it’s something that Warby Parker encourages in their workforce.”

But of course it’s not just about expressing vulnerability, it’s also about employees listening to each other and listening to customers.

For example, I recently heard this story from a Warby Parker employee in the U.S. One of their call center representatives was talking to a customer who was using a lot of references to Game of Thrones, the television show. It was very clear from the conversation that the caller was a very big fan of the show.

So, this telesales rep got up and went to one of his colleagues and asked, “Hey, aren’t you a big Game of Thrones fan? I have a customer I think you should talk to.”

That second rep then got on the phone had a conversation with the customer about this common interest.

Talk about exceeding expectations. That customer had an incredible experience because they felt it was fun, they felt it was quirky, and they felt like Warby Parker understood them.

None of that would have happened if that first rep hadn’t listened to the customer and his colleagues.

What is the #1 takeaway from your new book?

I really want people to remember that loyalty is an incredibly powerful way to build a sustainable business.

And you build loyalty by cultivating a culture of listening within a company.

When employees feel listened to and when employees listen to each other, that’s when your organization has a culture that attracts loyal customers.

“Loyal employees attract loyal customers.”

People, at the end of the day, have that in common. Whether you’re an employee or whether your customer, you feel respected when you’re listened to.

And customers or employees who feel respected are often the ones that are going to come back.

If they’re loyal then you have a business that’s sustainable because you have this resource of customers and employees that are going to give you feedback on how to stay relevant and innovate in times of rapid change.

Tell us about a transformation at Microsoft that you’re proud of.

In China, I’ve had the chance to develop a lot of the local corporate culture in the last few years, essentially shaping the way we do business here. The result of that work has been elevating Microsoft’s position in China, not only for employees but also in terms of business results. For example, our employee attrition rates have dropped while employee satisfaction scores have risen dramatically.

We’ve created one of the top performing businesses that Microsoft has globally in just the last few years by implementing some of the practices I talk about in my book.

I still remember living in Hong Kong for a while before moving to China. I was leading a large team and it was a huge learning opportunity for me in terms of learning to work within an Asian culture.

Traffic waits to go through the Cross-Harbour Tunnel in Hong Kong.

We often think of Hong Kong as a kind of an east-meets-west place, and in many ways it is, but our employees and our customers there were local customers. They were certainly Chinese in their approach to doing business.

When I first arrived my team members all thought, “Oh, I have this foreign manager who maybe is not going to understand me.” They were often very surprised at first when all I really wanted to do was sit and listen to them.

As they felt more comfortable sharing thoughts with me without being judged, they felt more willing to share ideas and to open up. Perhaps they had always had some great ideas or innovations and people just weren’t asking them about them or really sitting down and listening to them. So in many ways, it was also a bit of a learning experience for my team as well.

But very quickly the office dynamic changed. Our staff meetings became really exciting, whether they were my leadership team meetings or our all-hand meetings, because people were constantly offering innovations and ideas.

There’s also big debate in the Chinese language centered around the word for “question.” The word for “question” is sort of the same word as “problem.”

Well, I would often wonder why my team members weren’t asking as many questions as perhaps my other teams in Brazil or North America did, and often it was because of the language.

By asking a question, you’re kind of raising a problem, so people don’t do it culturally. So, I was trying to develop a culture where it was okay, even if you didn’t do it in public, to ask, “Hey, is this the best way to do something? Are there other ways we could do this?”

The impact was profound within the company. For one, our employees came to meetings with way more energy and excitement because they felt like they were really contributing to the growth of the business and surprisingly, it also helped us attract more employees because people really wanted to work for us.

People wanted to work on our teams because they saw what kind of culture we were building.

Finally, our customers started to feel a change with how we were doing business as well. Working with Microsoft was starting to be different because we were an organization that wanted to listen to them and listen to their ideas and not just tell them how we did things or enforce policies or rules.

“Businesses that may have at one time seen us as a necessary evil now saw that we’re there to form partnerships with them to help them grow. And none of that transformation in Hong Kong could have happened if we hadn’t started listening to our employees and our customers.”

How can you challenge our audience to be better listeners the next time they step into the office?

Just sit and try to listen. It sounds easy but it’s actually very difficult. Put down your phone. It’s going to take practice. Even when you’re with your kids or family members, put your phone down. Maybe close your computer if you’re working on your laptop. Then truly sit there and listen and engage in what the other person is saying.

Regardless of what they’re saying, they will immediately feel a much higher level of engagement on your part, even before you start to ask questions or express any kind of curiosity.

“Just being there to listen is an incredible starting point to build or to rebuild a relationship of any kind in your life.”