The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value
DescriptionWhy are a select few service firms better at what they do-- year in and year out-- than their competitors? For most senior managers, the profusion of anecdotal "service excellence" books fails to address this key question. In this pathbreaking book, world-renowned Harvard Business School service firm experts James L. Heskett, W. Earl Sasser, Jr. and Leonard A. Schlesinger reveal that leading companies stay on top by managing the "service profit chain". Based on five years of painstaking research, the authors show how managers at American Express, Southwest Airlines, Banc One, Waste Management, USAA, MBNA, Intuit, British Airways, Taco Bell, Fairfield Inns, Ritz-Carlton Hotel, and the Merry Maids subsidiary of ServiceMaster employ a quantifiable set of relationships that directly links profit and growth to not only customer loyalty and satisfaction, but to employee loyalty, satisfaction, and productivity. The strongest relationships the authors discovered are those between (1) profit and customer loyalty; (2) employee loyalty and customer loyalty; and (3) employee satisfaction and customer satisfaction. Moreover, these relationships are mutually reinforcing; that is, satisfied customers contribute to employee satisfaction and vice versa.
Here, finally, is the foundation for a powerful strategic service vision, a model on which any manager can build more focused operations and marketing capabilities. For example, the authors demonstrate how, in Banc One's operating divisions, a direct relationship between customer loyalty measured by the "depth" of a relationship, the number of banking services a customer utilizes, and profitability led the bank to encourage existing customers to further extend the bank services they use. Taco Bell has found that their stores in the top quadrant of customer satisfaction ratings outperform their other stores on all measures. At American Express Travel Services, offices that ticket quickly and accurately are more profitable than those which don't. With hundreds of examples like these, the authors show how to manage the customer-employee "satisfaction mirror" and the customer value equation to achieve a "customer's eye view" of goods and services. They describe how companies in any service industry can (1) measure service profit chain relationships across operating units; (2) communicate the resulting self-appraisal; (3) develop a "balanced scorecard" of performance; (4) develop a recognitions and rewards system tied to established measures; (5) communicate results company-wide; (6) develop an internal "best practice" information exchange; and (7) improve overall service profit chain performance.
What difference can service profit chain management make? A lot. Between 1986 and 1995, the common stock prices of the companies studied by the authors increased 147%, nearly twice as fast as the price of the stocks of their closest competitors. The proven success and high-yielding results from these high-achieving companies will make "The Service Profit Chain" required reading for senior, division, and business unit managers in all service companies, as well as for students of service management.
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About the Author
C. William Pollard Chairman, The Servicemaster Company Profit and service do mix. Jim Heskett, Earl Sasser and Len Schlesinger have provided a systematic way for us to understand the link. The examples that the authors draw from their studies and experiences make the book come alive -- it is a real learning experience.
Herbert D. Kelleher Chairman, President and CEO of Southwest Airlines Co. I am very angry with Jim Heskett, Earl Sasser and Len Schlesinger because I am deathly afraid that our competitors will read their book! The skunks have set forth in an accurate, profound, intelligible, and easily understandable way the core values, tenets, and practices that animate Southwest Airlines and can make any service business successful.
David H. Maister Author of Managing the Professional Service Firm and True Professionalism If you read only one book on service industry management, this is the one to read -- and to re-read. The simple but powerful framework integrates numerous insights covering a wide range of service industry topics.
Leonard Berry Professor of Marketing and JCPenney Professor of Retailing Studies, Texas A&M University, Author of On Great Service and Marketing Services The authors effectively integrate their wide body of research and thinking into an incisive framework for organizational leadership.