With Black Friday behind us, Cyber Monday upon us, and retail's make-or-break season in high gear, many of us are interacting more than usual with front-line service employees. And since it's also HBR's 90th birthday, some of us are thinking about the articles that have had the greatest impact over the years. What better moment to re-read "Putting the Service-Profit Chain to Work," which was originally published in 1994 and reprinted as a "classic" in 2008. The article, written by a leading group of service management thinkers (Jim Heskett, Tom Jones, Gary Loveman, Earl Sasser, and Len Schlesinger) is a great example of both the power a management idea can have, and how much work is required for an idea to become reality.
The basic idea of the service-profit chain (SPC) is that when organizations treat their employees well, they provide good service to customers. Customers then buy more, which improves revenues and profits. That gives the organization more resources, which it can use to improve employee and customer satisfaction even further. This virtuous cycle has been proven to work not only in retail but across the many service industries that have collectively become the core of every advanced economy.
The article is notable for a variety of reasons, some typical of best-selling HBR articles, and some quite distinctive. First, the typical attributes:
- The concept requires sustained effort to implement successfully. Building employee engagement and customer satisfaction takes years of action across a variety of fronts: training, measurement, compensation, etc. (If there is a "do this and get rich quick" article in HBR, I haven't read it.)
- For the ideas in the article to work, implementation has to be cross-functional. Human Resources, Sales and Marketing, and Operations—at least—need to be involved. Because so many functions are involved and because substantial resources need to be committed, it's normally the case that CEOs have to be engaged in the process. I've seen some efforts at implementing the SPC that have failed because no one was willing to bang enough heads to make the cross-functional collaboration happen.
- This is a way of life, not an individual program. It requires long-term commitment to be successful. Organizations that shift priorities regularly—from customer orientation to cost-cutting, for example—will not fare well with it. Organizations that replace their leaders with new ones determined to make their mark with their own signature programs will not fare well with it.
- Finally, it's also typical that even though the idea has been around for almost three decades, printed twice in HBR, and elaborated upon in several books, I regularly encounter executives in the service industry who haven't heard of it. I even ran into a CEO of a large retailer whose own company had successfully implemented SPC in the 90s, but who was totally unaware of it.
What's unusual about this HBR best-seller? Well, for one thing, some of the most successful implementers of the concept have been the co-authors themselves. Gary Loveman brought the idea to Harrah's (now Caesars Entertainment), and made that company the world's largest gaming firm. Len Schlesinger put the SPC to work at Limited Brands, where he was COO and Vice Chairman. Tom Jones has successfully employed many of the ideas at a number of Wendy's franchises he co-owns. The other two authors, Jim Heskett and Earl Sasser, remain active or semi-retired academics, but they certainly worked with a number of firms as individual consultants or advisors to the Service Profit Chain Institute.
The other unusual—and unfortunate—aspect of the SPC article is that the team that created it was largely disbanded at Harvard Business School. Schlesinger and Loveman became corporate executives, Jones became an entrepreneur, and Heskett took emeritus status at HBS; only Sasser remains a professor there. The "dream team" of service management was broken up, but the ideas live on and are available for application by anyone who's serious about employers, customers, and business success.