The impact of employee satisfaction on quality and profitability in high‐contact service industries

Abstract

The extant operations management literature has extensively investigated the associations among quality, customer satisfaction, and firm profitability. However, the influence of employee attributes on these performance dimensions has rarely been examined. In this study we investigate the impact of employee satisfaction on operational performance in high-contact service industries. Based on an empirical study of 206 service shops in Hong Kong, we examined the hypothesized relationships among employee satisfaction, service quality, customer satisfaction, and firm profitability. Using structural equations modeling, we found that employee satisfaction is significantly related to service quality and to customer satisfaction, while the latter in turn influences firm profitability. We also found that firm profitability has a moderate non-recursive effect on employee satisfaction, leading to a ''satisfaction-quality-profit cycle''. Our empirical investigation suggests that employee satisfaction is an important consideration for operations managers to boost service quality and customer satisfaction. We provide empirical evidence that employee satisfaction plays a significant role in enhancing the operational performance of organizations in the high-contact service sector. #

Assessing the Impact of Service Quality on Customers and Operators: Empirical Study

“…An increase in sales will demand network expansion that will lead to OEMs sales and improved operational performance of SPs. According to (Yee, Yeung, & Cheng, 2008), service quality and customer satisfaction eventually lead to financial gains. The combined correlation coefficient for CL EU and SR S = 0.799 that interpret that due to EUs loyalty with SPs, which will increase sales due to repeat purchase and positive word of mouth.…”

The Relationship between Non-Financial Performance and Financial Performance Using Balanced Scorecard Framework: A Research in Education Context

“…Moreover, Warren [4] states that profitability is the ability of an organization to generate profit in a certain period of time by means of capital or asset. From the statements above and the research done by Yee et al [1], it can be presumed that there are several indicators which are useful for evaluating financial performance of an organization, namely: revenue, asset and profit. Kieso and Weygandt [5] gives explanation that the revenue is "inflows or other additions to the common property of a unit or settlement of a liability (or a combination of both) during the period of delivery or production of goods, service delivery or other activity which is the primary operating of the unit.…”

“…Davis presented the employee satisfaction factor in his method called Job Descriptive Index (JDI). In this research, there are five indicators of job descriptive index, namely: the job itself, pay, supervision, co-workers, and promotions [1], which are employed to measure the feeling or attitude on satisfaction which is revealed by employees. What is meant by the job itself is the work done by the job holders daily; whether the work matches the educational backgrounds, the ability, interests and skills of the job holders [8].…”

“…The theory used as a basis that faculty satisfaction affects the quality of service is the principle of equity in social exchange theory. Wayne et al (1997) and Flinn (2005) in Yee et al [1] states in the context of social exchange theory as a superior offer working conditions that can make employees feel satisfied, and then in turn employee will provide the employer a commitment to provide better performance for the organization leading to a higher quality of service. Based on these studies, the first hypothesis is proposed:…”

“…This is the framework which is developed by Kaplan and Norton in the concept of Balanced Scorecard. Some researches related to Balanced Scorecard have been done recently, such as one research done by Yee et al [1] entitled "The Impact of Employee Satisfaction on Quality and Profitability in High-Contact Service Industries" and by Manuscript received May 1, 2013; revised July 13, 2013. The authors are with the Petra Christian University (e-mail: josuat@petra.ac.id).…”