From People to Profits

An empirical test of the service-profit chain in a large United Kingdom retail business explored how employee attitudes and behavior can improve customer retention and, consequently, company sales performance. Data were collected from 65,000 employees and 25,000 customers from almost 100 stores. The business collected customer satisfaction for just under 1 year and employee attitude data using the same questionnaire for 2 years. Four data sets were judged suitable outcome indicators for exploring the relationship between customers and employees: cash sales figures, absence data, staff turnover, and customer complaints. Staff turnover and customer complaints data were unrelated to the other major outcomes variables in the dataset. A case study attitude chain was developed from the statistical model created as a result of analysis. Perceptions of line management were strongly related to perceived company culture, which was strongly linked to employee commitment. Employee commitment acted on sales through three routes: directly on sales, mediated through customer service satisfaction, and through reduction in staff absence. The study demonstrated the significant role of human resource management in the service sector, because of the importance of a positive organization culture, good line management, employee commitment, and employee attendance to the effective working of the service-profit chain. (Appendixes contain 36 references, tables, and the attitude chain.) (YLB)