Improving Employee Productivity through Internal Service Quality

It’s not rocket science and it’s not magic. The service profit chain we’ve been discussing in our past few blogs is based on sound logic, but it really is very simple.

  • Internal service quality drives employee engagement
  • Employee engagement drives loyalty
  • Employee engagement drives productivity
  • Employee productivity and loyalty drive external value
  • External value drives customer satisfaction
  • Customer satisfaction drives customer loyalty
  • Customer loyalty drives profitability and growth

Decide what you want to improve, and then work backwards to see where to put your attention. Want to increase customer satisfaction? Want to deliver more value? Then improve employee loyalty and productivity.

And how do you increase employee loyalty and productivity? Create an environment where employees trust that they will be supported in a way that enables them to do their jobs. There are three elements to creating an environment that supports employees:

  1. Product/Service Quality. As part of an organization, employees must have some ownership or pride in the product or service you deliver. Employees must believe in the value or quality of the product or service delivered to the customer.
  2. Process Quality. Workplace and job design impact employees’ abilities to produce work. Hiring, training, internal communications must all be fine-tuned to support employees’ delivery of products or services to each other and to the customer.
  3. Work Experience Quality. Work experience is impacted by a myriad of factors, including salary, benefits, perks, growth potential, feeling valued, and the quality of relationships with managers and peers.

Highly engaged employees who are supported with internal service quality find ways to do their jobs better and more efficiently, increasing their productivity. Here are some examples:

Companies usually measure employee satisfaction to reduce the downtime and expense associated with losing team members and having to recruit and train replacements. In a recent report, Dale Carnegie estimates the annual costs of turnover in the US at $11 billion.

The long-term goal is to genuinely make the company and its office environment a better place in which to work. An efficient employee engagement strategy leads to increased productivity, reduction of staff turnover and rise of company profitability.

Research from Tower Watson and Aon Hewit shows that happy, engaged employees lead to a 19% increase in profitability, 22% increase in productivity and 37% higher sales. Furthermore, it is believed that HR turnover is reduced by 51% and employee burnout by 125%, with a 66% drop in sick leave costs.


Investing in internal quality allows you to fight two battles at the same time: you’re optimizing the way your company functions and you’re building employee satisfaction at the same time.

Employees are satisfied when the company they work for provides qualitative products/services, when they are efficient in their job and function with qualitative processes and when their work experience is engaging.

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