Rewards Strategy: A Key Driver of Service–Profit Chain

Abstract

The research deploys service–profit chain model to underscore the impact of effective rewards strategy on contribution and performance of employees in enhancing customer service and, thus, business performance. The service–profit chain postulates that higher employee satisfaction levels lead to high customer satisfaction and ultimately affect consumer loyalty and profitability. Therefore, human resource managers should implement better internal service quality practices, such as effective rewards strategy that focus on employee satisfaction, operational excellence and service orientation, to enhance firm performance. The research emphasizes that the service–profit chain begins with internal service quality triggered by financial and nonfinancial rewards and ends with business performance in terms of revenue growth and profitability. The research highlights that with effective rewards strategy, companies should take care of their employees first, because doing so will result in employees delivering a better customer experience and creating loyal customers who generate greater profits.