The Service Profit Chain: It Is Only Step 1

My journey of going back to school began with the desire to add detailed academic knowledge to compliment the skills I have developed thus far in my career. Now, deep into my second semester, it seems as though I walk away from each class with a new tool to add to my tool-belt. Two concepts that were recently covered in my management class is the service profit chain and the misconceptions about monetary incentives. I feel these topics are intimately connected, so I decided to cover them together.

The service profit chain, in my opinion, has one vitally important takeaway. That is to take care of internal customers first – the employees. Below is a simplified graphic of the service profit chain. If employees are taken care of and have high job satisfaction, there is a trickle-down effect that leads to higher revenues. There is no one size fits all answer to have satisfied employees, but I believe it starts with creating a positive company culture. That culture starts from the top – the leadership and management. I will save the topic of creating a positive culture for another post, but the important item to remember is that a company must first take care of its employees.

Service Profit ChainThe question then becomes, how does a company do this? My answer is the second concept and why I felt the two topics needed to be combined.  Most companies assume that money is the motivator that will push individuals to do their very best and exceed expectations over the long haul. They would be wrong. This is not simply an opinion, but supported by many scientific findings from the last fifty years. Here is a great article from the Harvard Business Review, for those who need some convincing, which details the reasons why. While there may be short-term benefits, monetary incentives often produce unwanted or negative long-term effects.

So, if monetary incentives are not good for motivation, then what does it? Again, the answer is quite simple – it is intrinsic motivation. This is motivation derived though internal rewards. Daniel Pink does a great job of laying it out in a Ted Talk.

Then how can employee satisfaction be taken to its highest level? There is a much easier way to find out than spending thousands on consultants to provide a report on best practices, propriety research and the secret sauce. It is as simple as just asking employees what they want. They actually know what they would like as a reward when things go well. And, in my opinion, the best part of knowing what they want is that they can be given just that. Examples could include more social outings as a group, a gift card to a nice restaurant in town, wearing jeans on Friday, or even being able to get an afternoon off. Company leaders should not assume they know what employees want or what will satisfy them.

To sum everything up, remember that employees drive revenue, so make sure they are satisfied. Don’t assume the promise of monetary rewards will produce a desired result. And, to know what employees actually want, just ask them. I found these concepts very interesting and important factors to consider when advising clients and for future positions I will hold.

What would be something you would want as a reward from work? Please post your thoughts below.

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