The Service Profit Chain

by James L. Heskett, W. Earl Sasser, Leonard A. Schlesinger

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.

Why 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. 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.

Genres: Business, Nonfiction

320 pages, Hardcover

First published September 17, 1990

Reviews

[Jake Berlin · Rating 3 out of 5]

the core message of the book -- that growth and profits are caused by customer loyalty, which are caused by customer satisfaction, which is caused by value and results delivered, which are caused by employee latitude to deliver, which also creates employee satisfaction -- is sound and compelling, but there are also a number of tangents that don't feel totally relevant, and there's probably more repetition than is necessary.

[Mark · Rating 3 out of 5]

Had really good ideas but outdated, repetitive, and needs some serious editing. An updated edition would do wonders.

[david bakka · Rating 5 out of 5]

Hands on approach to building a better organisation

What led me to this book was curiosity at one of Uganda's finest diners (Cafe Javas) the service at this restaurant is amazing, the people are motivated and the systems are amazing. One day I decided to search for why this is so. My curiosity led me to a Harvard Business Review article which I didn't finish but I kept talking about it till I decided I had to read this book. Now that I'm done with this book, it's a continuous guide for ultimate customer satisfaction through building employee loyalty. The recipe is in the book.

[kareem · Rating 5 out of 5]

original review:
http://www.reemer.com/archives/2005/0...

I read this book for the Creative Good Fellows program, and despite Phil Terry's ravings about how good this book is, I was not really looking forward to it. Turns out I should have taken my kindergarten teacher's advice and not judged The Service Profit Chain to be yet another boring business book based on its generic cover.

The Service Profit Chain lays out a connection that is relevant to any service organization: a measurable set of relationships between profitibility, customer loyalty and satisfaction, and employee satisfaction, productivity, and loyalty. It's not as dry as I expected, either, as it uses real-world examples (which I generally find helpful) from studies conducted in organizations like Southwest Airlines, MBNA, British Airways, and Ritz-Carlton, among others.

The tactic The Service Profit Chain took was to identify the relationships between business drivers and profitibility. So, instead of agreeing that "market share" or "customer satisfaction" are important and focusing on getting more, it identifed which business drivers could actually be tied to profitibility--market share wasn't one of them--and provided examples on how those drivers could be positively impacted to make a company more profitable.

There are some take-aways that can be applied to the work I currently do, but they are really relevant at a higher level where more broadly-reaching decisions are made. In other words, it's not wholly relevant yet, but definitely goes into the "read again" pile.

[Ed · Rating 5 out of 5]

Os autores fornecem uma plataforma estratégica para a gestão da cadeia de serviços demonstrando os relacionamentos existentes entre fidelização/satisfação de clientes/funcionários, com consequente aumento da lucratividade (nas dezenas de empresas estudadas pelos autores houve valorização das ações em torno de 150%).

A tese principal baseia-se no efeito-espelho: Funcionários satisfeitos, leais e engajados serão capazes de produzir clientes satisfeitos, leais e engajados.

Lançado em 1997, mas ainda atual e mais relevante do que nunca.

[Cameron · Rating 4 out of 5]

This does a great job of breaking down all of the systems that contribute to a service business' success (albeit in dry, academic prose). I think anyone who has a service business and wants to think about it on a broad, systems level, will find this book very useful. It is more of a philosophy, however, than a book of specific, useful solutions, so if that is what you are looking for, this is not the book for you.

[Steve Condrey · Rating 4 out of 5]

Good information, but needs editing!

This reference is a bit dated but the case studies given herein are valuable examples of how customer service can boost an organization's market position. Unfortunately the author goes back to the well on the same few case studies repeatedly. This is a book that could stand some better editing in a much needed updated edition.

[Jess · Rating 3 out of 5]

I read this for work. Pretty interesting, except a bit outdated in some ways, like talking about how great these new Automatic Teller Machines are!