The service profit chain postulates that higher employee satisfaction levels lead to high customer satisfaction, and ultimately affect consumer loyalty and profitability. One construct that has largely been ignored in most of this research has been the role of employee turnover. This paper proposes that employee turnover can also be a powerful predictor of employee sentiment and resulting customer satisfaction levels.
The relationship between employee satisfaction, employee turnover and customer satisfaction ratings is explored using an extensive data set from a chain of convenience stores. Employee perceptions were obtained from a survey which developed and administered to all store personnel. Turnover data were obtained from archival data. The data are analyzed using path analysis.
The test of various turnover indicators suggests that certain employee turnover indicators can perform as effectively as single‐item employee satisfaction ratings do in predicting customer satisfaction.
The finding that turnover predicts customer satisfaction as effectively as employee satisfaction is new and has important implications. More attention should be paid to managing customer satisfaction through managing turnover. Also, the use of turnover as an indicator of customer satisfaction should be explored in light of the fact that employee turnover is a naturally collected managerial measure, and does not require the costly administration of employee satisfaction surveys.
