The First Link in the Service-Profit Chain: How Corporate Functions Drive Value


By Jerry Seibert, M.A.


The service-profit chain explores how great service inspires customer loyalty, leading ultimately to more profitability. Great service however, does not occur in a vacuum. It is only possible when the systems, tools, and support are present to enable it. The first link in the chain is therefore internal: the value that functions like HR, Finance, IT, or Supply Chain bring to their stakeholders. It is a good practice then, to check in with your stakeholders: are they satisfied with your function’s services? Do they feel you are delivering sufficient value? It’s tempting to assume you know everything that is important in effectively delivering on your core products or services; you have the deepest understanding of how your group functions and what results it must achieve. Yet how you judge value and how your stakeholders judge it may not be in alignment. It is common to base your assessment of the value you deliver on the metrics you’ve carefully designed to manage the operation. But there is a risk in assuming those metrics also capture what is most important to stakeholders. I once reviewed the results of an internal customer survey with the CHRO of a Fortune 100 manufacturer. He was puzzled by the poor ratings on talent acquisition. The company had outsourced recruitment and the statistics related to a number of key performance indicators (KPIs) ran counter to the survey results. For example, the number of positions filled and time-to-fill were running the same or better than before the transition. What their KPIs did not show was the frustration managers were feeling with the new supplier. The contract recruiters had none of the institutional knowledge the old in-house team had possessed. They were struggling to learn the unique markets for specialized engineers. Because they did not have much feel for the company or the jobs, they were pulling the managers into the process much more than the managers were used to. And turnover among the recruiters meant there was always a learning curve. Managers were aggravated, feeling like they were doing most of the recruitment work themselves. The frustration never showed up in the traditional efficiency-focused recruitment metrics. Another risk - although it seems counterintuitive - is to focus too much on customer service. We all want a pleasant experience when we interact with a supplier, whether internal or external. A likeable staff that tries hard can make up for many failings... at least for a time. Yet at a northeastern utility, we found one of the most pronounced examples of “on the other hand” feedback we have ever seen. The function we worked with had fantastic ratings on a wide range of service dimensions. Staff in the function were always available, returned calls, were courteous and personable. Their stakeholders did not hesitate to praise them for these characteristics. On some measures they topped out our database: 15, 20 even 25 percentage points above the norm. On the other hand, many of the staff had moved into the department from other parts of the company and were chosen for their interpersonal skills. Few had any professional training or certification in the field. Over time, the lack of base skills and knowledge compounded. Errors were common. Projects were behind schedule. Most core function deliverables were actually rated below the norm. One manager described the staff as “respectful and professional, even when they cannot deliver.” In fact, the higher you went in the organization, the greater the level of dissatisfaction (“nice” typically does not cut it with executive teams). How you interact with your internal customers will greatly influence their assessments. It is important to know if there are issues with availability, timeliness, professionalism and the like. Yet in the end it is what you do that matters most. You have to deliver on your core services. In my experience, the most valuable feedback for corporate functions such as HR, Finance, IT, or Supply Chain addresses three areas: what you do (your “product”), what it is like to interact with your function, and what impact you are having on the business. These three areas should be included in any survey of your stakeholders, often referred to as voice of the customer (VOC) surveys. A VOC survey of managers is the central element in OrgVitality’s Internal Customer Experience (ICX) program. ICX is a comprehensive approach to measuring and improving the value delivered by internal functions, applying a range of tools as needed, such as:

  • Interviews to gain critical insights from senior leaders regarding the role of the function, the value it adds to the business, where improvement is needed and how it must adapt to future challenges

  • A company-wide VOC survey for managers

  • A self-assessment by staff on the VOC items, for a “departmental 360”, as well as the ability to measure the team’s degree of alignment, capabilities and engagement.

  • Driver analyses to identify what has the most impact on stakeholders’ judgement of value

  • A structured, collaborative process for prioritization and action planning Eager to learn more? Join me for my upcoming webinar, in which I'll dive into these issues in greater detail, outlining specifically how you can measure and improve your internal services in order to drive organizational success: Empowering HR to Drive Business Success: Measuring and Growing HR Value Tuesday, March 24th, 12:30-1:00 PM EST. Register Here Questions or comments? Contact me directly. Jerry Seibert, M.A., is an executive consultant at OrgVitality. He has 30 years of experience working with organizations to measure and improve customer, employee and other stakeholder perceptions. In addition to leading a wide range of client engagements, Jerry has also led research in internal customer service and its connection to business outcomes. He has designed and implemented employee surveys for numerous organizations, ranging in scope from global entities to small privately held firms. He is the co-author of Hidden Drivers of Success: Leveraging Employee Insights for Strategic Advantage.