While this may seem like an obvious question with an obvious answer, I am often surprised by the response I get from executive teams when I use this question to facilitate a group exercise.   Invariably, leadership teams will come up with the answer, “People who buy our products.”  When I bring up the concept of thinking of employees as customers I am sometimes met by disbelief and choking on coffee.  If you are in that camp, let me help you out. 

World – renowned Harvard Business School service firm experts James L. Heskett, W. Earl Sasser Jr., and Leonard A. Schlesigner wanted to answer the question about why a select few businesses are better at what they do – year in an year out – then their competitors.  After five years of studying the most profitable companies, they found that those who are most successful have the exact same 9 steps that happen in the exact same order for each company.  They studied companies such as American Express, Banc One, USAA, MBNA, Intuit, Taco Bell, Fairfield Inns, Ritz-Carlton Hotel, and the list goes on. 

Here’s the specific 9 steps on the order in which they were found to operate in the most profitable companies:

Internal Service Quality

Employee Satisfaction

Employee Productivity

External Service Value

Customer Satisfaction

Customer Loyalty

Revenue Growth

Shareholder Value/Profitability

This is how the Loyalty Profit Chain works: You will get a huge increase in employee satisfaction when you maximize internal service quality.  To deliver internal service quality you have to design the workplace and positions so that each employee has the tools, resources, and latitude to do their job and make decisions.  This results in employee satisfaction, which leads to employee loyalty, which raises employee productivity. Higher productivity means greater external service value for customers (the customer gets the product that they desire in a way which leaves them completely satisfied)--which enhances customer satisfaction and loyalty.

Hear this:  An increase of 5% in customer loyalty can boost profits 25%-85%.  So, if you aren’t thinking of and treating your employees as customers, you are most likely missing that key first link in the value chain.  Tomorrow, ways in which you can maximize your profits.