The service profit chain: An investigation of the linkages between employees, customers and organization profitability

This research sought empirical evidence for the links in Heskett, Sasser, and Schlesinger's (1997) Service-Profit Chain. The Service-Profit Chain postulates that supportive internal human resource practices initiate a chain of events leading to organizational profitability. This research generally supported the contention that organizational practices (measured as internal service quality) influence employee perceptions and behaviors. Employee satisfaction led to increased employee retention and decreased payroll costs. Additionally, the number of claims filed against garages by customers were also lower when employee satisfaction was higher. This finding supports the notion that satisfaction is positively related to productivity.; Employee variables were correlated with customer satisfaction, but that relationship was mediated through external service value as hypothesized in the Service Profit Chain. That is, satisfied and productive employees may produce higher service value for customers which, in turn, leads to customer satisfaction. A clear relationship between customer satisfaction and customer loyalty was not found in this research.; Employees who were "very satisfied" rated their stores as more productive than employees who were just "satisfied" with their jobs. Very satisfied employees also rated their intentions to stay significantly higher than did satisfied employees. While the data did not allow direct comparisons between job satisfaction and actual productivity, perceptions of productivity were correlated with actual productivity. Intentions to stay were also correlated with actual retention. These findings may suggest that companies seeking to increase productivity and employee retention should start by striving for employee satisfaction along with their efforts to promote customer satisfaction.; Consistent with past research (Tornow & Wiley, 1991; Wiley, 1991) this research also found negative correlations between satisfaction measures and organizational sales and profitability. However, positive relationships were found between satisfaction and revenue growth, suggesting that satisfaction may come at the expense of sales and profit, but not revenue growth. Future research examining satisfaction indicators relative to the multiple perspectives by which organizations measure their success could begin to delineate situation specific conditions that signal when it is appropriate to stress activities aimed at promoting employee and customer satisfaction.