HBR’s classic article, “Putting the Service-Profit Chain to Work”, first published in 1994, had a profound impact on my thinking about the fundamental drivers of business success. Employee satisfaction and empowerment directly impact the member experience and, of course, the member’s actions determine financial success. The article is as fresh and relevant today and applicable to your credit union’s business as when it was written 25 years ago.
In the intervening years, volumes of data have been collected and analyzed that support the themes of the article. The service-profit-chain describes the interconnected relationships that create financial results. Simply stated: 1. Customer loyalty drives proﬁtability and growth. 2. Customer satisfaction drives customer loyalty. 3. Value drives customer satisfaction. 4. Employee productivity drives value. 5. Employee loyalty drives productivity. 6. Employee satisfaction drives loyalty. And, 7. Internal quality drives employee satisfaction.
Senior management puts the chain to work when it concentrates on the quality of the work environment, i.e., its organization’s culture as much as on financial measures. Management focuses on the employees and commits to invest in their people. Listening, learning and collecting data are fundamental as management seeks to understand how employees feel about their work, their colleagues, and the organization. Management actively uses what they learn to take action that drives employee satisfaction and engagement. Management is aware of the importance of each employee, each member, and the interactions between them.
Employees are most engaged when they operate in an atmosphere of respect and sense that they have opportunities to learn, improve, grow, and add depth to their work. They are engaged when they have management’s attention and the company provides the technological and knowledge-based tools that they need to succeed. They are engaged when they feel empowered to make things right for members, colleagues and themselves. These aspects of a healthy culture drive employee loyalty, which in turn triggers the other links in the chain – employee productivity, leading to creating value for the customer, resulting in satisfied members, whose loyalty builds. For your credit union member, loyalty means member retention, repeat business, and their referrals.
Millennials now represent about half of the labor force, and they are particularly attuned to organizational values, the organizational climate, and opportunities for learning and growth. Moreover, they are more likely to vote with their feet when they feel they are not in an environment where their aims, objectives and ambitions are addressed in their conversations with management. Gallup reports that they are more than three times as likely than non-millennials to change jobs. For this group in particular, loyalty and retention arise from their empowerment and autonomy in driving value for the member.
Your credit union has the power to sustain a culture that inspires employee engagement and loyalty and harnesses their desire to serve your credit union’s members. High quality member service matters in inspiring member loyalty, and profit and growth are driven by it. Your credit union’s success increases when your most loyal members become “apostles”, committing their business to your credit union and spreading the word of excellent service.