How Employee Engagement Drives Profits

What is the service-profit chain?

For many years now, various consultants and researchers have decried the low incidence of employee engagement. A recent example is a new study by The Conference Board of Canada reports that only 27 percent of employees in Canada are highly engaged. Ruth Wright, Director, Leadership and Human Resources Research, The Conference Board of Canada. goes on to state that, “Organizations need to understand why engagement is so important and which workplace factors can increase it.”

 

Let me be very clear about this, Ms. Wright. Employee Engagement is important because it drives organizational performance!
 
Yes, there is a connection between these two factors and it is called The Service-Profit Chain! It is the difference between those companies that thrive while others stagnate.

The Service-Profit Chain is a theory and business model evolved by a group of researchers from Harvard University in the nineties. It establishes relationships between the various links of the ‘service chain’, starting with employee engagement, and continuing with customer loyalty, productivity, and finally profitability.
 
It goes something like this.
 
As with most things in a company, it starts with the managers. The first step on the road to profitability and growth begins with managing employees in ways that increase their engagement with the company. For example, effective managers do such things as:
 

 All of these actions help to increase the degree to which employees are actively involved in the success of the company, i.e. they increase employee engagement!
 
Since these workers are now highly engaged, they are more likely to be motivated to produce products and services that meet the customers’ needs and preferences. As a result, customers are more likely to buy more of these products or services. And, most importantly, this also means that customers will pay more for them!
 
Being able to purchase products and services designed to meet their needs and preferences creates a high level of customer satisfaction, which, in turn, leads to that most prized goal - customer loyalty! And customer loyalty results in high revenue growth and sustainable profits - the pot of gold at the rainbow’s end!
 
This the chain of events can best be summed up by the statement: Employee Engagement Drives Performance!