Write a short essay (250 words) on why the service-profit chain is important to operations management.
The Chain provides linkage between profits, customer loyalty and satisfaction and employee productivity, loyalty and satisfaction. According to this model, profits of an organization result from customer loyalty which signifies customer retention, repeat purchases and referrals by existing customers. Customer loyalty in turn arises from customer satisfaction. Customer satisfaction is again outcome of external service value which is measured by the benefits they (customers) receive with respect to the costs that they incur in acquiring the service. External service value is generated because of employees who are satisfied, loyal and productive. Satisfaction of employee is again a consequence of internal service quality which happens due to a good work environment, good job design, proper employee development, proper rewards and recognition and ease of serving customers.
Different companies such as Southwest Airlines, Taco Bell, ServiceMaster and others are using Service-Profit Chain to drive profitability in their businesses.
Service-Profit Chain can also be termed as a particular kind of leadership. This leadership style gives importance to each employee (internal customer) and customer (external to the organization). Thus people (whether internal or external) are considered to be the most important asset in the organization. The top management is usually very caring and encourages participatory decision-making. Some of the companies using this type of leadership style are Southwest Airlines, ServiceMaster and Banc One.
Every service organization has various operations to be performed, which comes under operations management and hence its importance.