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Managing the Employee
8 Factor through Cycles

The Service Profit Chain is a well-known description of the
inter-relationship of three elements of classic behavioral
business cycle: happy employees tend to create happy
customers, which positively affect share price and
profitability.

There is indeed a strong correlation between employee
fulfillment, customer fulfillment, and fluctuations in share
price. The chart below (Figure 8.1) illustrates this powerful
cause and effect relationship. The trend-line for share price
has been manually shifted to the left on the chart by one
quarter to more easily illustrate the relationships without the
inevitable lag between customer fulfillment and share price
fluctuations. In this particular example, the lag time between
customer fulfillment changes and share price fluctuations
was ¼. This can be a short as one week and as long as
several quarters depending on how fast the market changes,
e.g. sales cycles, speed of competitors.

This particular telecommunications organization actively
tracked employee and customer satisfaction for two to three
years using quarterly summary measurements. The correl-
ation between customer satisfaction and employee satis-
faction was 75 during eight measurement periods. The
correlation was stronger than coincidental while the con-
clusions were intuitive and statistical. The study covered six
business units that contained 75,000–80,000 employees.