A popular framework of organizational effectiveness is the Service Profit Chain (Heskett, Jones, Loveman, Sasser & Schlesinger, 1994), which is built around the concept that customer loyalty and satisfaction are leading indicators of profit and revenue growth. Keeping with this perspective, the objective of this article is to examine the relative efficacy of the two predictors of customer satisfaction most often assessed through employee opinion surveys: employee satisfaction and climate for service.
Traditional measures of business success include revenue growth, earnings and return on assets. Such variables are lagging indicators, which some have characterized as a rear-view mirror approach to business performance management (Rucci, Kirn & Quinn, 1998). As a result, many management theorists have shifted their focus to a search for leading indicators of future financial success. By identifying indicators that predict performance, organizations can measure the effectiveness of their strategy proactively and make timely modifications to improve the likelihood of obtaining the desired business outcomes (Ittner & Larcker, 2003).
There is no question that employee and customer satisfaction are significantly linked. There is likewise no doubt that climate for service and customer satisfaction are significantly related. Both sets of findings are well documented. However, a remaining question is whether climate for service (a customer-centric measure) or employee satisfaction (an employee-centric measure) is the more potent predictor of customer satisfaction.
It would be reasonable to predict that customer-centric measures (e.g., climate for service) would be more strongly associated with customer satisfaction than employee-centric (e.g., employee satisfaction) items. Initial findings (Brooks, Wiley, & Hause, 2006; Lundby & Fenlason, 2004) support this conclusion. We hypothesize that climate for service will be a relatively stronger (i.e., more potent)...