SERVICE PROFIT CHAIN

A business model that drives profits through employee satisfaction and engagement

The service profit chain concept was first proposed in an article in Harvard Business Review in 1994 by James Heskett, Thomas Jones, Gary Loveman, Earl Sasser, and Leonard Schlesinger entitled Putting The Service Profit Chain To Work. The same authors published a book on the subject in 1997 with the title The Service Profit Chain – How Leading Companies Link Profit And Growth To Loyalty, Satisfaction And Value

The service profit chain model argues that happy employees will not just do a job, they will do a great job, and this will be evident to customers. As a result, customers will be happy and happy customers become loyal, generating a high lifetime value and high profits. The chain begins with employees and feeds through to increased profits. Loyal employees reduce the cost to the company as there is less hiring, less training and higher productivity.

 

The service profit chain is a model that can be applied to any size of company – large or small. It is a model particularly suited to businesses where employees have a good deal of access to customers. Airlines, retail and leisure companies are obvious examples. However, the model has an application for all types of businesses.

Jim Collins, in his book Good To Great , argued that the starting point of any company is good staff. He said that if you get the right people on the bus, the wrong people off the bus, and the right people in the right seats, you can take the bus almost anywhere. This is also the thesis of the service profit chain. Good employees who are motivated will deliver good profits. Ask yourself the question, “Have I got the right people on the bus?”, “Have I got them in the right seats?”.

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