The impact of employee satisfaction on quality and profitability in high-contact service industries

Research output: Journal article publicationJournal articleAcademic researchpeer-review

234 Citations (Scopus)


The extant operations management literature has extensively investigated the associations among quality, customer satisfaction, and firm profitability. However, the influence of employee attributes on these performance dimensions has rarely been examined. In this study we investigate the impact of employee satisfaction on operational performance in high-contact service industries. Based on an empirical study of 206 service shops in Hong Kong, we examined the hypothesized relationships among employee satisfaction, service quality, customer satisfaction, and firm profitability. Using structural equations modeling, we found that employee satisfaction is significantly related to service quality and to customer satisfaction, while the latter in turn influences firm profitability. We also found that firm profitability has a moderate non-recursive effect on employee satisfaction, leading to a "satisfaction-quality-profit cycle". Our empirical investigation suggests that employee satisfaction is an important consideration for operations managers to boost service quality and customer satisfaction. We provide empirical evidence that employee satisfaction plays a significant role in enhancing the operational performance of organizations in the high-contact service sector.
Original languageEnglish
Pages (from-to)651-668
Number of pages18
JournalJournal of Operations Management
Issue number5
Publication statusPublished - 1 Sep 2008


  • Customer satisfaction
  • Empirical research
  • Employee satisfaction
  • Firm profitability
  • Service quality

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

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