by by James L. Heskett, W. Earl Sasser, Joseph Wheeler
The service-profit chain (SPC) is as relevant today as it was when we wrote about it in “Putting the Service-Profit Chain to Work,” in the March 1994 issue of Harvard Business Review. In fact, three of the co-authors of that article have since left the academy to apply SPC principles in the business world. Company Examples
Highly successful companies like Bouygues Telecom in France (now the third largest in its markets in the ten years since its founding) and ING DIRECT (now the 17th largest bank in the U.S. after just seven years) have been created since then, based on service-profit chain (SPC) relationships. Others, such as Rackspace Hosting (engaged in Web site design and management), Westpac (one of Australia’s leading banks), CEMEX (one of the world’s largest cement companies, based in Mexico), Harrah’s Entertainment (a leader in branded casino entertainment, based in Reno, Nevada), and Baptist Health Care (a not-for-profit health care organization centered in northwest Florida and southern Alabama), have been revitalized through actions suggested by SPC relationships. Positive examples of SPC practice are commonly found in companies at the top of Fortune’s 100 Best Places to Work and the Wall Street Journal’s best-performing companies. Other companies, such as Circuit City, provide examples of what happens when organizations manage themselves into a “doom loop” of negative SPC relationships. In March 2007, Circuit City announced that it would replace 3,400 of its more experienced, higher-paid salespeople with new, lower-paid hires. In so doing, it damaged customer satisfaction and ultimately suffered the financial consequences.
Service-Profit Chain Analysis
In the past 14 years literally hundreds of academic studies have examined one or more of the seven links in the service-profit chain we described in our 1994 article. (David Maister,...