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  • Writer's pictureCally MacColla

Employee Satisfaction as a Precursor for Customer Satisfaction - and Visa Versa

Can you picture a happy employee with no happy customers?

What about a customer who is happy dealing with unhappy employees?

Simply put, increasing employee satisfaction has been studied to improve customer satisfaction and profitability. (Koys 2001, Brown & Lam 2008)

Also true in reverse, customer facing employees who perform effectively to produce a satisfying customer experience are themselves happier in their roles. (Frey et al 2013, Brown & Lam 2008)


What this article is about

This article will talk you through how to create more customer value by increasing employee satisfaction and using a customer centred view of the service experience.

First off is an illustration of how value is created (and maximized) in service delivery. Then the Service-Profit Chain is used to show how employee satisfaction is linked with customer satisfaction, loyalty & profitability.


Service Delivery Value as an Equation

What is External Service Value?

This is simply the Value of the Service as judged by the customer. Value meaning both their enjoyment/usefulness of the service, relative to the costs they pay for that service.

External Service Value = Customer Satisfaction - Total Cost

ESV = (Customer Perception of Service - Expectations) - (Financial, Time + Effort*)

Customer's Perception of Service

Quality & Intuitiveness of Delivery Process + Employee Competence & Attitude + Effort Required by Customer + Physical/Digital Evidence + Actual Result

Design Thinking is a useful approach in evaluating the use of the above elements. This involves walking yourself through the customer's thoughts and actions throughout their service interaction. Put aside any knowledge of the service, internal processes etc. focus only on the experience from the customer's point of view.

While doing so, look for areas of uncertainty, friction, effort or other negative emotions; while looking fo ways enhance areas where customer enjoys the service and try to hold their focus there.

Questions to have in mind during this process include:

  • What stimulus is the customer getting to buy the service, then what information are they given throughout the delivery process?

  • Is this information clear & concise?

  • Is the customer confused or unsure of how to proceed at any point?

  • Is the customer waiting for extended periods? Do they know how long they will need to wait?

  • Do we have a callback option? Or something to make waiting more tenable?

  • Are our employees trained and enabled to help customers without bouncing them around several departments?

  • How are they greeted and conversed with?

  • Are they rushing through the process? Or taking too long?

  • What is required of the customer to conduct the service?

  • Can this decreased to improve service quality?

  • To what extent can we increase customer involvement to lower costs?

  • Now that the customer has been serviced, do they have anything to take with them?

  • Perhaps something that could help encourage future sales

  • Were the needs they expected met?

  • Can we do anything to surpass their expectations?

This could be a very long list as there are many things to consider at every level of interaction.

Peak End Rule

This theory surrounds events with a defined start and end, where the experience is not summed up or remembered as a sum of its parts, but by 2 snapshots. One at the Peak and another at the End of the experience.

For service delivery, this can inform our strategy significantly. For example, we might be able to negate the effects of a long wait by ensuring the peak experience, of dealing with our sales staff, is pleasant, personalized and upbeat. We could also focus on how the service ends as the taste left in customers' mouths is likely what is going to be reported to others. (Stratten & Cramer 2012)


Creating a positive customer expectation is what creates sales. You convince the customer that you have something they can expect from you that fills a need they have - simple.

However, this must be managed. Set too high an expectation and underdeliver (in terms of customer perception) then they will be left unhappy. Set expectations too low, and no one will be convinced to use your service.

Customer's Perception of Service - Expectations = Customer Satisfaction

If the customer perceives the service delivered to be at least what they expected, your processes and staff have delivered a good service.

Increasing customer satisfaction beyond simply meeting their expectations is desirable for the following reasons:

  • Customers who are extremely happy with a service make the employees delivering that service happier and more fulfilled in their roles.

  • Exceeding customers' expectations is a great way to win customer loyalty (see below)

  • Customers who are extremely satisfied and loyal are likely to be one of your most valuable marketing assets.

Heskett et al 1994

Financial, Time & Effort* Costs = Total Cost

Along with the effort required on the customer's behalf, the two remaining costs are financial and time. Now that they have gone through the service, was it worth the money and the time they spent on it? Keep in mind that the amount of Time & Money a customer spends on an item will also affect their level of expectations.

*Effort has already been accounted for in the Customer's Perception of Service and wouldn't be double counted here too.

External Service Value

To maximize service value:

  • Use design thinking to see the experience from the customer's perspective and improve it along the dimensions discussed above.

  • Focus on Peak & End experiences.

  • Align marketing expectations with the operational realities - look to exceed expectations for best results.

  • Manage total costs demanded from the customer depending on their expectations, requirements and willingness to pay.


The Service-Profit Chain

There is a great paper by Heskett et al (1994), published in the Harvard Business Review, where the concept of the Service-Profit Chain was originally developed.

As can be seen below, Employee Satisfaction & Customer Satisfaction are linked through how they interact with Service Delivery Processes, Employment Practices and each other.

"The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers." Heskett et al (1994 p.120)

This one paragraph could be a summary for why MacColla Consulting exists. Having an unsatisfied employee is hurtful to the business, the customer and the worker themselves.
If this problem were fixed, not only would it be more pleasant to work in that business, but it would be more effective for both filling customers' needs and ownership's desire for profit.

Win-Lose Profit Maximization

Profit maximization has been vilified for its propensity to squeeze expenses at the cost of employees and customers. Standard ways of maximizing profits may involve make staff redundant, asking remaining staff to do more for less, streamlining services negatively effecting customer experience.

Win-Win Profit Maximization

Using the Service-Profit Chain, we could make the business more profitable by investing in employee experience. Lessen turnover, increase job satisfaction, increase service quality, increase customer loyalty, increase profitability.

Note from author

If you have any comments, questions or points of contention I would really like to hear them. Please comment below or make your way to my contact page.

Thanks for reading.


Brown, S. P., & Lam, S. K. (2008). A Meta-Analysis of Relationships Linking Employee Satisfaction to Customer Responses. Journal of Retailing, 84(3), 243–255.doi:10.1016/j.jretai.2008.06.001

Koys, D.J. (2001) The Effects of Employee Satisfaction, Organizational Citizenship Behavior, and Turnover on Organizational Effectiveness: A Unit-Level, Longitudinal Study. Personnel Psychology, 54(1), 101–114.doi:10.1111/j.1744-6570.2001.tb00087.x

Frey, R.-V., Bayón, T., Totzek, D. (2013) “How Customer Satisfaction Affects Employee Satisfaction and Retention in a Professional Services Context,” Journal of Service Research, 16(4), 503–517, available:

Heskett, J. L., T. O. Jones, G. W. Loveman, W. Earl Sasser, and L. A. Schlesinger. "Putting the Service-Profit Chain to Work."Harvard Business Review 72, no. 2 (March–April 1994): 164–174.

Stratten, Scott; Kramer, Alison (2012). The Book of Business Awesome / The Book of Business UnAwesome. John Wiley & Sons. p. 12. ISBN978-1-118-31546-0.

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