The Service-Profit Chain
The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers.
The service-profit chain is also defined by a special kind of leadership. CEOs of exemplary service companies emphasize the importance of each employee and customer. For these CEOs, the focus on customers and employees is no empty slogan tailored to an annual management meeting. For example, Herbert Kelleher, CEO of Southwest Airlines, can be found aboard airplanes, on tarmacs, and in terminals, interacting with employees and customers. Kelleher believes that hiring employees that have the right attitude is so important that the hiring process takes on a “patina of spirituality.” In addition, he believes that “anyone who looks at things solely in terms of factors that can easily be quantified is missing the heart of business, which is people.” William Pollard, the chairman of ServiceMaster, continually underscores the importance of “teacher-learner” managers, who have what he calls “a servant’s heart.” And John McCoy, CEO of Banc One, stresses the “uncommon partnership,” a system of support that provides maximum latitude to individual bank presidents while supplying information systems and common measurements of customer satisfaction and financial measures.
A closer look at each link reveals how the service-profit chain functions as a whole