Employee Satisfaction and Customer Satisfaction: Testing the Service-Profit Chain in a Chinese Securities firm

Abstract

With the rising share of the service sector in the global economy, best practices in production, human resource management (HRM) and marketing are copied from manufacturing and applied to service industries. As the production and marketing of services involve human interaction between producer and consumer, the question is relevant to what extent the marketing function intersects with production and HRM functions. A particular strand of research deals with the relationship between employee versus customer satisfaction. If the two are found to be mutually reinforcing, then company policies should take that fact into consideration. Motivation of staff hinges on a joint effort of production, HRM and marketing managers. And in reverse, staff motivation is a key element in successful marketing. The empirical study of a leading Chinese securities firm on which this article is based, tests the relationship between employee satisfaction, customer satisfaction, and their joint impact on profitability. The findings indicate that employee satisfaction and customer satisfaction are positive correlated, and both of them have a positive impact on profitability. Satisfied employees deliver the service customers desire for the company and remain loyal to the company, which results in a higher return on employee investment. Customer satisfaction and increased profitability can be achieved by managing the quality of employees and by improving employee satisfaction. Since customer satisfaction feeds back into employee satisfaction, a lasting competitive advantage has been created.

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