First Business

June 02, 2012

Human Resources: When Companies Honor Employees, Profits Result

Have you heard of the Service Profit Chain? Several years ago I learned of this tremendous model at a seminar sponsored by Omnicom(NYSE: OMC), who purchased the company I founded, MarketStar Corporation.

Several distinguished Harvard professors created a theory in the 90s that they subsequently published in a book The Service Profit Chain How Leading Companies Link Profit and Growth To Loyalty, Satisfaction and Value (by Heskett, Jones, Loveman, Sasser and Schlesinger).

The model states that if corporate leaders honor employees, profits will be the ultimate result. It is the opposite approach from many organizations and leaders, particularly in the public market, who have money as their primary goal, and who consider their employeesthe "human capital†to be dispensable.

In short, the model identifies that a company’s employees are its most valuable assets, together with the customers the company serves. Financial reward is a by-product. This is a wonderful model used by many of the world’s top companies.

The steps are as follows:

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