Managerial decisions are based on assumptions about the relationships between different facets of performance. Investments in workers, for example, in many cases are predicated on the premise that well-rewarded and employed employees deliver higher levels of service, leading to customer loyalty that enhances monetary functionality. Yet, as author Rhian Silvestro notes, supervisors are frequently not able to justify the premises underlying their competitive strategies with data from their own organizations. Consequently, they risk developing wrongheaded strategies that can lead them. Over the past 30 years, she notes, researchers have developed tools designed to help supervisors understand the drivers of performance in their companies. But in many cases, supervisors make assumptions about links that are presumed that they have not fully examined. One study found that only 21% of supervisors who said they executed strategy maps had analyzed the links within their own organizations; many of those who had analyzed the links found their early assumptions were flawed. This article emerged from research related to the "service profit chain," a well known system of research focused on the drivers of performance in service industries that was developed by James L. Heskett, W. Earl Sasser Jr., and Leonard A. Schlesinger. The service profit chain proposes loyalty on the one hand and a mirror effect between worker satisfaction, and customer satisfaction and loyalty on the other, which in turn drives financial performance. Nevertheless, in examining data from two British retail chains - a superstore chain and a home improvement store chain - the author found that the empirical evidence not always supported the assumptions within the model from both retailing organizations. "Although intuitively appealing," the author writes, " strategy maps and models like the service profit chain have a common pitfall: They support supervisors to embrace assumptions about the drivers of financial performance that may not stand up to close examination in their own organizations." At the superstore chain, for example, instead of finding a positive relationship between employee satisfaction and productivity and gain, she found negative correlations. She found further negative correlations between employee satisfaction and sales growth, and between employee loyalty and both gain and productivity.
PUBLICATION DATE: July 01, 2016 PRODUCT #: SMR560-HCB-ENG
This is just an excerpt. This case is about LEADERSHIP & MANAGING PEOPLE
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