Service-Profit Chain: How HR directly impacts Profit

Back in 2008, the Harvard Business Review dusted off an article from 1994; this article is as timeless to business (even today) as a supply-demand graph.  The article was about the Service-Profit Chain (click HERE for the article).

Here is the chart I created while trying to explain the service profit chain to a few of my clients.  In fact, we used this chart as a jumping off point to explore various Strategic-HR options, and how these changes could impact their organizations.  In a nut shell, here is how to look at the chart:

  • What is Culture – Knowing and Understanding a Deliberate Company Identity Influences Who Gets Hired…
  • Quality Hires, Working in an Environment aligned with their Desired Working Conditions, Increases Retention…
  • Employee Retention leads to Increased Production (you define production), which Improves the Customer Experience…
  • Customer Satisfaction drives Value and Customer Loyalty (which leads to referrals), Referral-Based New-Business and Repeat-Business create More Profit.

Do you run a company?  Don’t use the Red-Half of the Chart to Pull the Green, Use the Green-Half to Drive the Red!  Think of your own company…as technological advantages flatten out, people will continue to be the differentiator.

Like this? Want to know how it can impact your company? Click HERE to see my LinkedIn Page with all my contact info and drop me a line.

A Special Hat Tip to the authors of the source material: James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinge


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