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Getting to grips with the 'Service Profit Chain'

One of the questions I often get asked from clients has been, how do large service companies manage to create consistently great experiences around the world? What is the secret of their success?!
I usually answer with something like...'with holistic management systems that are executed through local leadership day in day out'. The 'What' and the 'How'. Processes and systems in this instance are often misconstrued as IT systems (of course these assist)... but the kind of systems that large companies such as McDonald's uses to execute it's multibillion pound operation are through 'management systems' that are assessed regularly to measure incremental continuous improvements in each of the outlets day in day out around the world. This approach allows teams to focus on the customers and the management to focus on supporting the team.

We have developed a flexible model of Management Systems that can be easily applied to most service organisations who want to grow customer and employee loyalty. Each system is allocated as a responsibility within the team in a similar way that department responsibilities are allocated in an 'organisation'. This creates a framework of organised empowerment that allows teams to develop creative practical solutions for improvement captured with routine action plans.

Leadership alone doesn't get the best results without great management systems and vice versa. Once these foundational systems are in place, we also design and deliver development programmes that offer the know how to support managers and leaders in the business execute the process.

It is not rocket science, but it is a proven winning formula that delivers a simple and consistent way to execute on the components or links of the Service Profit Chain.

The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers.

All too often we see companies try to find 'quick fixes', cost savings, that often short cut the model or don't have appropriate/robust systems in place. This is particularly prevalent in the earlier parts of the chain where the employee experience can be largely ignored. The obvious impact of this can be high levels of dissatisfaction and potentially being left way behind the pack in the highly competitive marketplace for people that can be offered better employee experiences.

Leadership Underlies the Chain's Success

The service-profit chain is also defined by a special kind of leadership. CEOs of exemplary service companies emphasise the importance of each employee and customer. For these CEOs, the focus on customers and employees is no empty slogan tailored to an annual management meeting. For example, Herbert Kelleher, CEO of Southwest Airlines, can be found aboard airplanes, on tarmacs, and in terminals, interacting with employees and customers. Kelleher believes that hiring employees that have the right attitude is so important that the hiring process takes on a "patina of spirituality." In addition, he believes that "anyone who looks at things solely in terms of factors that can easily be quantified is missing the heart of business, which is people." Check out the impact of getting it right by hitting the link below and watching the famous Southwest Airlines (unscripted) safety briefing that became viral in youtube.

Leaders who understand the service-profit chain develop and maintain an organisation culture centred around service to customers and fellow employees. It is a real privilege to work with clients that get his!They display a willingness and ability to listen. Herb Kelleher spends a great deal of time with customers and employees, experiencing their companies' service processes while listening to employees for suggestions for improvement. A client of ours recently opened up a 'Kwoon' (training hall for Chinese martial arts) just off oxford circus to help facilitate employee wellbeing. They really care about their employees and spend a great deal of time selecting, training, and recognising them. More importantly they empower employees to make choices and decisions that have huge benefits for customers, sales and profitability.

If you would like to find out more of how to drive performance through a combination of our simple management systems and great leadership to deliver on the service profit chain, then keep an eye out for our articles or contact us at or on 0207 2052532.

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