International School of Management
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- Corporate Profitability and the Service Profit Chain
- Chapter 11 RESEARCH METHODOLOGY Objectives
- Method of Data Collection
- Selection and Description of Interviewees – CEO, V.P., A.V.P., and R.V.P.
- Selection and Description of Interviewees – Chief Executive Officers
- Selection and Description of Interviewees – Vice President of Human Resources Training
- Selection and Description of Interviewees – Vice Presidents (Lending, Operations, Finance)
- Selection and Distribution of Interviewees – Regional Vice President’s
- Selection and Description of Interviewees – Board of Directors
- Selection of Description of Interviewees – Assistant Vice President of Accounting
- Chapter 12 Interview Results CEO, Vice Presidents, and Board Members Service Profit Chain
Customer SatisfactionThe literature available on the subject of improving customer satisfaction is just as prevalent as the information available in regard to improving employee satisfaction. Many different studies focused on the abilities of new technologies to drastically improve customer service. Businesses are now able to personalize and improve interactions with every customer, and across every point-of-contact, thanks to new technologies for information capture and analysis. Customers receive precisely the information they need, when they need it and how they need it, while businesses are able to manage relationships more effectively, efficiently and profitably through all avenues of interaction (IBM 2006). Many studies suggest the need for organizations to focus on their level of service delivery to the customer. Increasingly, the only thing that separates one business from its competitors is the level of service provided (Saxby 2006). Most companies lose 45% to 50% of their customers every five years, winning new customers can be up to 20 times more expensive than retaining existing customers (Full 2006). The higher the level of satisfaction that customers experience, the greater the trust and confidence they show. As this trust and confidence grows, they will be less likely to move their business for a few percentage points (Castiglione 2006). When it comes to measuring their customers’ satisfaction, too many companies have settled into a comfortable rut of changing their approaches to get the results they want (Columbusn 2005). “Competitors that are prospering in the new global economy recognize that measuring customer satisfaction is key. Only by doing so can they hold on to the customers they have and understand how to better attract new customers” (Cacioppo 2000). A good amount of the literature regarding the improvement of customer satisfaction considered the importance of measuring what matters to customers. This information is critical to understanding exactly what you need to fix. For example, if the customers are particularly dissatisfied with some aspect of the organization’s service, but it is discovered that the thing they are unhappy with is not important to them, then the organization can focus on what is important for increasing customer satisfaction (Measuring 2006). An effective way to measure and gauge customer expectations and satisfaction is through the use of Customer Relationship Management tools. Maintaining control of customer relationships is possible only through consistent implementation of classic, well-proven customer bonding techniques, such as individualized customer care and communications, rewards for customer value and loyalty, special consideration for high-value customers and customized products and services (Ferruzza 1999). According to the literature, implementing customer relationship management strategies is the most effective way to accomplish this. Numerous empirical studies show a strong positive relationship between employee satisfaction and customer satisfaction. One study in particular, found that, depending on market segment and industry, between 40 and 80 percent of customer satisfaction and customer loyalty was accounted for by the relationship between employees and customers (Bulgarella 2005). A basic psychology switch in employees mirrors the psychological changes in an organization’s customers too. Most often, the customers’ relationship with an organization comes down to their relationship with the organization’s employees (Borland 2006). Customer satisfaction and loyalty invariably are earned by delivering excellent customer service, and the human touch is often the key differentiator. Additionally, customers with higher lifetime value have learned to expect more. “Gold” customers often bypass automation and directly deal with support staff to get their problems resolved (Uckun and Matan 2007). Putting employee and customer satisfaction in the spotlight when planning strategy is one of the priorities for organizations committed to continuous improvement, both internally and externally (Greenberg 2006). Customer Loyalty “Tracking customer satisfaction alone is no longer sufficient and is often misleading. But when combined with two other factors – loyalty attitudes, and needs and discretion – it can play an important role” (Gokey and Coyles 2001). The real essence of customer loyalty is finding ways to take advantage of opportunities for customer contact and service. It is critical to tap as many as possible to create lasting loyalty (Kindinger 2005). Many recent studies provide empirical evidence of something many in business already know: customer loyalty is a key driver of profitability. The most important basis for strategy development, however, is a comprehensive understanding of what drives customer loyalty and how strong those drivers are (Teegarden and Krok 2006). Companies know they need to pay attention to their customers. They know the financial benefits that come from keeping their customers happy. And they’ve done their best to put “satisfaction” programs in place. Yet regular monitoring of various U.S. industries reveals that relatively few companies (17%, as of 2000) have improved their customer satisfaction index measures after six years (McEwen 2005). “There is an abundance of literature that draws the connection between the attitudes of employees and the attitudes toward the company of the customer. Numerous studies support the claim that employees with favorable attitudes provide better customer service, and in most cases, improve the quality of customers’ experience” (Johnson 2006). The research asserted that it is not enough to just deliver great customer service; it is necessary to translate this great service into customer loyalty. The best way to engender a greater degree of customer loyalty is to exceed customer expectations and anticipate their needs. Expectations are constantly evolving because improvements in service shift customer demands. While customers initially appreciate better services, they quickly get used to, expect and demand them (Cleveland 2003). Customers will continue to favor organizations that provide unique, one-on-one, personalized service, whether it is delivered face-to-face or over the Internet (Colombo 2006). Corporate Profitability and the Service Profit Chain There were very few relevant papers available that incorporated the elements of employee satisfaction, customer satisfaction/loyalty, and corporate profitability into one theory known as the service profit chain. The pre-eminent work on this subject can be found in the research of James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, who together, coined the phrase service profit chain. Their book by the same name connects the importance of the relationships that exist between employees, customers, and corporate profitability. “Simply stated, service profit chain thinking maintains that there are direct and strong relationships between profit; growth; customer loyalty; customer satisfaction; the value of goods and services delivered to customers; and employee capability, satisfaction, loyalty, and productivity” (Heskett, Sasser and Schlesinger 1997). Many papers set out to link either improved employee satisfaction to improved customer satisfaction, or employee satisfaction to improved corporate profitability, or improved customer satisfaction/loyalty to improved corporate profitability. There is also the opportunity to move that marginally profitable customer into profit if an organization understands the customer dynamics involved and are able to either find a way of lowering the cost to serve or finding them more mutually profitable services to take (Meltzer 2006). You need to know how much it costs to service your existing customers and how much profit they bring the organization. But who are the customers you want to retain (and why) and what are the characteristics of customers you want to acquire (Meltzer 2003)? Very few papers made a comprehensive connection between the employee, the customer, and corporate profitability. Either one are relating to one other area was connected, or just one of the elements was analyzed. Chapter 11 RESEARCH METHODOLOGY Objectives The objective of this dissertation is to contribute to the existing knowledge base related to employee satisfaction and customer satisfaction as important contributors to corporate profitability. A comprehensive and in-depth literature search was conducted to assess the level of existing research and knowledge base in order to assess areas that could benefit from further analysis. Research Approach An initial assessment of existing research relating to the elements of employee satisfaction, customer satisfaction/retention/loyalty, and the elements of corporate profitability was conducted in order to identify and focus on essential elements that would be beneficial for this dissertation. This was followed by a more comprehensive analysis of existing research for the purpose of identifying those works that best explained the concept of the service profit chain. This process included industry specific literature searches using Proquest, URSUS, MARVEL, and college search sources at Harvard University, Northeastern University, and the University of Maine. In addition to these databases, searches for materials in many business periodicals such as Harvard Business Review, The Economist, and HR Digest were conducted. The results of these searches aided in identifying empirical research and published analysis related to employee satisfaction, customer service, and corporate profitability. Surprisingly, with the innumerable literature available on employee satisfaction, customer retention and corporate profitability, very little at all examines each in detail and analyzes their effect on one another. Searches for literature pertaining to the service profit chain, or similar works, produced only a handful of results, most of which are attributed to the previously mentioned authors of the book The Service Profit Chain. Because of this, extensive searches were conducted on the different elements of the service profit chain, then compiled and analyzed in this paper. The lack of congruity and continuity in the existing literature between the relationships of the three main elements of the service profit chain are therefore the focus of this paper. In order to enhance the application of the research found in the literature, structured, as well as unstructured interviews were conducted with industry professionals on every facet of the service profit chain. Certain questions were provided to the interviewees in advance of the actual interview, along with a brief description of the purpose of the interviews. During the actual interview process, the respondents were given the latitude to expound on the subject matter in an unguided fashion, as they are all considered to be expert professionals in their respective disciplines. The objective of the interviews was not to elicit fixed responses, but rather to garner additional information on the differing aspects of the service profit chain that would enhance the current literature. The respondents all agreed to allow their identities and comments to be disclosed in any appropriate manner that would allow the information they provided to enhance the body of knowledge associated with the paper. Method of Data Collection Face-to-face interviews were conducted and notes taken to document the answers of the interviewees for eleven of the fifteen interviews. The remaining four interviews were conducted using e-mail in a question and answer format. Most interviews lasted no more than thirty minutes at one time. However, more than a total of ten hours was spent interviewing John Reed the CEO at Maine Savings and Robert Carmichael, the Vice President of Human Resources & Training at Maine Savings. All of the respondents were cordial, informative, and eager to answer questions in a comprehensive manner. Selection and Description of Interviewees – CEO, V.P., A.V.P., and R.V.P. Because of the large amount of literature available in regard to the three elements of the service profit chain, the interviews were used to help identify and confirm the information found in the written analysis. There was no expectation that the interviews would garner any previously unknown information. There was an expectation that the interview process would reveal different methods of application of the information, which it did. In order to garner the most comprehensive input possible and have the ability to identify similar information that would be used to add to the body of knowledge relating to the research in this paper, only recognized industry professionals were interviewed. As part of this process, two CEO’s, two Board members, four Vice Presidents, an Assistant Vice President, and two Regional Vice President’s were interviewed. Everyone in this group currently works professionally in Maine. However, all of them have experience across the U.S., and two of them have extensive international experience. Selection and Description of Interviewees – Chief Executive Officers A total of two interviews with CEO’s was conducted, both of which were conducted face-to-face. In the case of John Reed, the CEO at Maine Savings, several comprehensive interviews were conducted. Selection and Description of Interviewees – Vice President of Human Resources & Training The person occupying this position at Maine Savings, Robert G. Carmichael has extensive international human resources and training experience and is a retired Brigadier General with the United States Army. In his capacity as the Assistant Adjutant General, he was responsible for the training and development of thousands of soldiers. Rob has written extensively about employee satisfaction and has designed many employee development programs for several different organizations. Selection and Description of Interviewees – Vice Presidents (Lending, Operations, Finance) A total of four Vice Presidents with extensive experience in Lending, Retail Operations, Human Resources, Finance, and Logistics were interviewed. The interviews were all face-to-face and were preceded by a list of five standard questions. The feedback of these interviewees acted to verify many of the assertions found in the literature regarding employee satisfaction, customer retention, and corporate profitability. Selection and Distribution of Interviewees – Regional Vice President’s Two Vice Presidents with extensive retail banking experience were interviewed. The interviews were initially conducted via email and were followed up with phone calls. These interviews centered on the operational application of human resource theory in the workplace. The perspective’s of these individuals was in line with the research conducted in the literature. Selection and Description of Interviewees – Board of Directors Two members of the Board of Directors at Maine Savings were interviewed. Each has been a long-time member of the Board and both have seen the benefits of the implementation of the service profit chain strategy at Maine Savings. These Board members were able to give perspectives in regard to Board governance of such initiatives. Selection of Description of Interviewees – Assistant Vice President of Accounting An A.V.P. of Accounting with more than twenty years of experience in all aspects of banking was interviewed. The interviews were held face-to-face and occurred several times. This A.V.P. was able to give perspectives of both financial management and as an employee working their way up through the organization. Chapter 12 Interview Results CEO, Vice Presidents, and Board Members Service Profit Chain Of the executives that were interviewed, one CEO had not implemented a strategy similar to that of the service profit chain strategy, although he had extensive experience managing the three main elements that make it up. The initial question was in regard to the importance of the relationship in business of employee satisfaction, customer satisfaction/retention, and corporate profitability. The responses for the most part, were very similar to one another. All of the executives felt that each component was important to the overall success of any organization and that attention should be paid to all of them. The next interview question was in regard to which of the three components was the most important. One of the executives responded that employee satisfaction was the most important because without employees, there would be no business. Another executive responded that customer satisfaction and retention was the most important because without them there would be no income for the business to pay employees. Yet another executive asserted that the money had to be available in order to hire and keep satisfied employees which in turn, creates satisfied customers that add to an organization’s profitability. Most of the interviewees came back to the conclusion that all of the elements were equally important to the business equation and necessary for organizations to grow and prosper. The interviews however, took and aggregate or overall approach by the respondents to the issue unless otherwise directed by the interviewer. Because of this, the interview questions were designed to go into further detail with regard to the three main elements of the service profit chain. As the following interview results will show, the responses to the questions were heavily weighted based on the executive’s area of responsibility within their respective organizations. For example, the human resource and training executive tended to favor the elements associated with employee satisfaction, while the executive responsible for retail operations tended to favor the elements associated with customer satisfaction/retention. Employee Satisfaction The interviewees were asked to list, in order of importance, the elements associated with employee satisfaction. The top five responses were fairly uniform between respondents with such items as remuneration, sick/vacation time, hours, training, and advancement opportunities being the most often cited. One executive was adamant about pay being the most important because employees that do not feel adequately compensated are incapable of further motivation. He cited an example of one of his long-time employees that did a capable job at her assigned duties, but would do nothing extra, fretted when cross-training was mentioned, and was not motivated to learn anything new. He added that her favorite slogan was “eight and out the gate”, referring to working her eight hours and no more, then going home. He said that when the employee was finally confronted about this attitude, she responded that she was only paid enough to perform the basic duties for which she was hired. The human resource executive cited many examples of different employees being motivated by different motivating factors such as flexible hours, more time off, a different work environment, a training opportunity, or a new position, just to name a few. His assertion was that employees all have different motivators and it is up to the supervisor, and ultimately the organization to identify those motivators in order to foster an environment that the employee will be satisfied with and excel in. He gave numerous examples of employees that seemed to be having an issue with one or more parts of their performance and when the issue was discussed, it was found that there were varying problems that were unique to the individual employee. An executive from a much smaller institution offered a different opinion that was not shared by any of the other interviewees. His opinion was that all lower level employees should have a fixed pay rate, given to them up front, with a delineated set of tasks that they were to perform. If they desired further training or motivation of any kind, it was up to them to make a formal request to their immediate supervisor. He believed that if the employee were informed of their rate of pay and expected duties up front, there would be no gray area or opportunity for misunderstanding or miscommunication. When he was asked if he thought that this would work in a larger organization, he admitted that a variation of this style would have to be implemented in order to be effective. The Board members however, were on the other end of the spectrum with their responses. Their responses were very liberal in regard to benefits that employees should receive. One Board member even commented, “what ever will ensure the satisfaction of the employees is what we should do.” Their responses to questions regarding employee satisfaction were difficult to gauge in comparison to the other interviewees responses because they were so skewed toward the employee. When asked about the costs of some of these benefits, they tended to think that enough money could be found in the organization to satisfy the requests. In their opinions, satisfied employees (at all costs) made for satisfied customers, which in turn, made for a profitable organization. The interviewees were asked if any of them had ever participated in a 360-degree review of the elements associated with employee satisfaction in the past. The question was subsequently revised to add, “making employees a core part of organizational goals and the strategic plan.” Most of the interviewees had been involved in several aspects related to the elements associated with employee satisfaction, with one, the human resource executive actually being involved in the implementation of the service profit strategy in the past. The HR executive’s past experience in relation to implementing employee satisfaction into the strategic plan and organizational goals proved to be a positive one. The executive made the determination that in order to correctly assess all aspects relating to employee satisfaction, it was first necessary to start at the top with senior management. Once there is a decision to incorporate employee satisfaction measures as part of organizational goals, then every aspect of the initiative can be examined and is open for criticism and change, if necessary. Interviewees were asked about communicating to employees. Specifically, what, when, and how should employees be communicated to. The interviewees, on the whole, said that open and honest communication was essential to the success of the organization. One interviewee related an experience he had at a previous position in relation to employee communication. He stated that the employee turnover rate was more than three times higher than the peer average at this particular organization. He soon began instituting exit interviews as part of the standard operating procedure for this company, which did not previously exist. In almost every exit interview, employees made comments about the lack of communication from management and indicated their frustration with the communication process in general of the company. After further investigation, the executive found that there was little to no communication between management and employees and visa versa. This created an atmosphere of distrust, mystery, and speculation. In order to remedy the situation, the executive instituted a daily management e-mail to employees and created an employee newsletter to act as a bilateral communication tool for the company. Within a year, the turnover rate was cut by more than seventy-five percent. Because most of the interviewees had only been involved in certain elements of employee satisfaction, they were unable to relate their experiences to overall changes in the organizational culture. Even still, some of the executives related certain experiences in regard to elements of enhancing employee satisfaction that were helpful illustrations and examples of the process at work. Two of the executives had positive experiences that were a result of additional employee empowerment. In one case, front-line employees required the verbal and written approval of management in order to effectuate a decision resulting in greater than five dollars. This was causing a tremendous amount of contention with both employees and customers alike. The executive said that this company was a privately held family company and that the policy had been this way since the original owner established it in the late 1940’s. With his input, the rest of the senior management team decided to provide additional training to employees on certain decision-making processes that they may encounter on the front lines. Shortly thereafter, they amended the policy to read five hundred dollars rather than five dollars. The change in attitude of the employees was almost immediate, and shortly thereafter, positive comments from customers came pouring in. There was an overall difference of opinion between the executives in regard to the extent to which an organization should go in order to increase employee satisfaction. The human resource executive and his colleagues that had dealt with human resource issues for a long period of time tended to convey the attitude that an organization should do anything in its power to ensure high levels of employee satisfaction. The executives that had little or no exposure to human resources and were more geared toward logistics and operations tended to have the opinion that once a “good” package was created and offered, it was up to the employee to be satisfied with what was offered. The human resource executive’s answer to this point of view was to insist that an organization must continually work with its employees to ensure an environment where employees have the ability to increase their level of satisfaction. Directory: uploads uploads -> 587 Return function, r i(X) r i(0) r i(1) r i(2) r i(3) 1 0 2 4 6 Thermal Station, I 2 0 1 5 6 3 0 3 5 6 10 uploads -> Department of science and humanities department of mathematics part-a questions and answers uploads -> The Case Against the nypd’s Quota-Driven ‘Broken Windows’ Policing What Is It? uploads -> For want of a nail uploads -> Ownership Models There are two different types of ownership models uploads -> Police Militarization uploads -> City of rising star regular meting thursday, july 14, 2016 uploads -> Township of winfield uploads -> Stop Militarizing Law Enforcement Act of 2014 uploads -> The Black Panther Party’s Ten-Point Program What We Want Now! Download 1.01 Mb. Share with your friends:
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