Putting the Service-Profit Chain to Work (7)


Employee Loyalty Drives Productivity

Traditional measures of the losses incurred by employee turnover concentrate only on the cost of recruiting, hiring, and training replacements. In most service jobs, the real cost of turnover is the loss of productivity and decreased customer satisfaction. One recent study of an automobile dealer’s sales personnel by Abt Associates concluded that the average monthly cost of replacing a sales representative who had five to eight years of experience with an employee who had less than one year of experience was as much as $36,000 in sales. And the costs of losing a valued broker at a securities firm can be still more dire. Conservatively estimated, it takes nearly five years for a broker to rebuild relationships with customers that can return $1 million per year in commissions to the brokerage house—a cumulative loss of at least $2.5 million in commissions.

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