Service Effectiveness Through Employee-Customer Linkages

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Academy of Management Executive, 2002, Vol. 16, No. 4

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Driving service effectiveness through employee-customer linkages S. Douglas Pugh, Joerg Dietz, Jack W. Wiley, and Scott M. Brooks Executive Overview

........................................................................................................................................................................ The management team at a national retailer of consumer healthcare products came under pressure from the parent company to improve profitability. In the past, they had focused on progressive human resource practices as a key success factor. Now, they had to show how these practices drove growth and profitability and what practices could be improved. They asked a consulting firm to conduct the analyses necessary to address this challenge. Analysis of data from financial records, customer satisfaction surveys, and employee surveys for each of the company’s approximately 400 stores began with the business criteria of sales growth and profitability and worked backwards through customer satisfaction toward employee opinions. The results showed that stores which had increased their financial performance over the years (sales, profit, and profit as a percent of revenue) had been creating a different customer experience. They had raised their customers’ ratings of the communication and service performance of the sales staff. In turn, the improved customer ratings of staff were associated with an improvement in a set of employee perceptions. This set of employee perceptions centered around their service capability—in particular, their ability to fix customer 73

Linkage research provides a powerful tool for service organizations because it identifies those elements of the work environment that are connected, or linked, with important organizational outcomes including customer satisfaction and financial performance. In doing so, linkage research integrates functional areas across the organization, providing managers with a common language and framework for a holistic, strategic measurement system focusing on the shared objective of serving the customer. Data from linkage studies are also used to establish an agenda for improving the practices that matter most for customer satisfaction, and the data serve as useful predictors of future firm performance. This article describes the basic linkage model that connects employees and customers in service organizations. We describe the contexts in which employee opinions are most strongly related to customer outcomes and identify the eight practices that have been found to be important drivers of customer satisfaction.

problems. This capability was high in stores where employees received training, worked well in teams, and where store management emphasized service quality. Specifically, an improvement in this set of employee perceptions by 6 percentage points was associated with a 1.3 percentage point improvement in customer ratings of the sales staff. This improvement, in turn, led to a .5 percent improvement in sales, which translated into an additional $4 million in revenue. Figure 1 is a graphical representation of these associations. Employee-Customer Linkage Research The preceding vignette reports an example of linkage research conducted by the third author’s firm.1 Linkage research connects, or links, elements of the work environment described by employees to important organizational outcomes such as customer satisfaction and financial performance. The purpose of this article is to inform managers about the basics and practice of linkage research. For the retailer of healthcare products in the opening example, the benefits of linkage research were threefold. First, the results created a compelling story. Across the company, employees could...
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