One of the most interesting sessions at the Leadership Summit was a three minute segment by Ashish Nanda on what is formally called the Service-Profit Chain. Dr. Nanda suggested that Success could be substituted for Profit. Big name, I know. But it is a very interesting and potentially a huge learning for all of us. The gist? There is a direct connection between customer loyalty and the internal quality of the mission environment. It’s direct. But it’s 6 steps in a 7 step chain removed from the end in mind.
It’s like this: Customer loyalty determines profitability and growth. Translation: If your customers (however you define that) are loyal to your organization your mission succeeds. That’s step one in the argument. But that assertion begs the question: what drives customer loyalty? Do they need to be wowed? Do they need over the top amazement at your product? Does it need to be remarkable?
According to the study, customer satisfaction drives customer loyalty. There is some very interesting research that backs this up. And it does just make sense. But the research makes an important distinction. There is a very big difference in outcome when a customer moves from "satisfied" to "very satisfied". They become 6 times more likely to repurchase! That is significant. So, what enables movement from satisfied to very satisfied?
The next step is that value drives customer satisfaction. Moving from satisfied to very satisfied is connected with offering better value. How do you offer better value?
Employee productivity drives value. This requires a little translation for many of us. We need to think in terms of the old Jim Dethmer discussion about who your real customer is. Most of us will need to develop a broader definition of employee to include those who are volunteers but deeply committed to our mission. In other words, our customers are attending right alongside our employees. And that is an important distinction. When the people who make what we do possible are enabled to really succeed, when their efforts are given every opportunity to thrive, they will become more productive. And when all of us are more productive it can significantly raise the value delivered to our customers, the ones in the seats.
So the next question is, what drives employee productivity? If that’s essential ingredient, what drives it? Employee loyalty drives productivity. This is an easy one to understand but potentially difficult to implement. We can all get the idea that by keeping our employees (even the volunteers) in their role longer, as they steadily become more and more competent, they’ll be able to deliver far better results as they interact with the customer. I think all of us can understand how that would be true. It may be a challenge for us to implement. But as a key link in the chain we’ve got to do it.
So what drives employee loyalty? Employee satisfaction. What is so important about employee satisfaction? They stay in the game longer. Satisfied employees have a much lower turnover and that leads to a greatly increased effectiveness as you’re less frequently exposing your customers to newly positioned employees. See how that would be true? You only have to imagine your roles that are closest to the customer (maybe greeters and ushers) to see how important a seasoned and satisfied employee is.
So what drives employee satisfaction? It mostly has to do with internal quality of the working environment. What is that? The things that allow your employees to achieve results for the customer. Ease of use. Ability to do the job well. Clarity on the task and what is a win.
What drives the whole process? Leadership that "develops and maintains a corporate culture centered around service to customers and fellow employees."
This is a great article! If you’re interested in developing this kind of vibe on your team, I highly recommend downloading Putting the Service-Profit Chain to Work.