Abstract
Integrating the Job Demands-Resources (JD-R) model and Self-Determination Theory (SDT), this study advances a more human-centric and future-ready SPC framework that aligns internal HR practices with external service outcomes through enriched employee experiences. In our conceptualisation, we critically reexamine the nature and relevance of job resources as originally proposed in the SPC, highlighting the need for recalibration in response to emerging work demands such as cognitive overload, emotional labour, and the blurring of work-life boundaries. Concurrently, SDT revisits legacy constructs such as job satisfaction, employee loyalty, and productivity from an employee-centric perspective, foregrounding psychological needs for autonomy, competence, and relatedness as key drivers of sustainable performance. The study proposes a paradigmatic shift in the SPC framework by advocating for the replacement of job satisfaction with EX and loyalty with Employee Engagement. EX is conceptualised as a multidimensional construct encompassing work design, leadership, well-being, and career development, while engagement captures the intrinsic motivation and discretionary effort essential for delivering superior service. Additionally, this paper argues for a reconceptualisation of Internal Service Quality (ISQ), positioning it as a critical enabler of EX, highlighting job resources, such as flexibility and psychosocial well-being as essential for addressing the heightened demands of contemporary work environments.
Keywords
Introduction
Although traditionally studied as independent domains, the fields of service research and human resource management (HRM) have increasingly intersected, exploring new avenues for interdisciplinary collaboration in improving service quality (Chand, 2010) service fairness (Bowen et al., 1999) and customer-focussed service management (Schneider, 1994), to list a few. Scholars in organisational service research recognised early-on that fostering long term and sustainable customer relationships necessitates an equally sustained focus on employee relationships (Bowen, 2016; Heskett et al., 1994). This realisation catalysed a shift in service scholarship, leading to a deeper exploration of the employee-customer relationship as a fundamental driver of service excellence (Grönroos & Voima, 2013).
Conversely, HRM research, which historically concentrated on workforce management within manufacturing and production-oriented industries (Kaufman, 2014), began expanding its focus in response to the evolving service economy, which now accounts a significant proportion of most nation’s gross domestic product. As service industries increasingly prioritised the role of employees in delivering superior customer experiences, HRM scholarship found renewed purpose in understanding employee behaviours, motivation, and engagement within service-oriented contexts (Schneider & Bowen, 1993). This shift provided a compelling “why” to the traditional “how” of organisational behaviour (OB) and HRM frameworks, positioning employees not merely as resources but as co-creators of customer value (Lusch & Vargo, 2014).
Analysing the terrain of relevant research at the intersection of service and HRM, various frameworks have emerged from this interdisciplinary scholarship, including the Attraction-Selection-Attrition (ASA) framework (Schneider, 1987), Organisational frontlines (OF) (Singh & Bridge, 2023; Singh et al., 2017), and the Strength of the HRM System (Bowen & Ostroff, 2004; Ostroff & Bowen, 2016), among others (Bowen lists 10 frameworks; Bowen, 2024). These frameworks collectively emphasise the role of employees as pivotal to service delivery and customer satisfaction.
A widely used and cited framework in this category is the Service Profit-Chain (SPC) framework, which posits a direct link between internal service quality, employee satisfaction, customer satisfaction, and profitability (Heskett et al., 1997). The popularity of this framework can be attributed to its inherent basic tenet of the model that if you take care of your employees and your customers will be taken care of. Building on its foundational role as an integrative framework in service management, the SPC (see below, Figure 1) has traditionally linked internal marketing (e.g., internal service quality, employee satisfaction, and performance) to external marketing (e.g., service quality, customer satisfaction, and loyalty) and ultimately to firm performance (e.g., revenue and profitability).
Traditional service profit chain.
Despite its widespread adoption in marketing and service management literature, the SPC has received comparatively limited attention from HRM, OB, and strategic management disciplines (Schneider & Bowen, 2019). Moreover, empirical testing of the SPC has been challenging, as it requires comprehensive, multi-source data, leading most studies to examine only selective components of the framework (Hogreve et al., 2017).
This study pursues two main objectives. First, it critically examines the HRM variables embedded within the SPC framework, especially those that contribute to internal service quality, underpinned by a bundle of supportive HRM practices and assessing their relevance and adequacy in addressing the challenges posed by a multi-generational workforce operating within VUCA environments. Second, it seeks to propose a revised set of HRM variables where existing constructs are found to be misaligned with contemporary work realities, particularly those shaped by the dynamics of the Experience Economy and disruptions caused by digitalisation and series of natural and human-engineered crises (Malik et al., 2025). Moreover, this study responds to recent calls for research on “stakeholder-centred purpose” by examining how internal and external stakeholders, such as employees and customers, are embedded within a broader organisational ecosystem (Thaichon et al., 2022). This study adopts a critical narrative literature review methodology to examine and interrogate multiple human resource management (HRM) constructs. This approach diverges from traditional systematic reviews by emphasising theory-driven interpretation and synthesis, enabling a deeper exploration of conceptual evolutions and underlying assumptions (Torraco, 2005). As Torraco (2005) notes, integrative reviews which are closely related to narrative reviews are especially useful for reconceptualising or developing theoretical frameworks when existing literature is diverse or fragmented. Unlike rigid systematic reviews or meta-analytical protocols, this format supports an interpretive lens (Torraco, 2005) that is necessary for aligning HRM constructs with contemporary organisational realities, particularly those shaped by the contemporary dynamic work environments.
The rest of the paper is organised as follows: First, it introduces the theoretical underpinning of this study; Job Demand Resources (JDR) and Self Determination Theory (SDT) and explains the rationale behind selecting them. Next, it examines the new demands placed on the contemporary service workplace. To this end, the following section interrogates the job resources recommended in the SPC in the light of the new job demands. Next, it examines the traditional SPC variables employee satisfaction, employee retention, and productivity in the light of SDT. This section also makes a case for why the new variables of Employee Experience and Employee Engagement need to be integrated in the SPC. Finally, it consolidates all these recommendations and presents it into a comprehensive and revised SPC framework.
Theoretical Grounding
The SPC framework can be analytically divided into two interrelated domains: internal and external marketing (see Figure 1) (Hogreve et al., 2022). Internal marketing focuses on the organisational practices and resources that are accessible to employees (referred in the SPC as Internal Service Quality (ISQ)); while external marketing captures the resultant service value delivered to customers and its associated business outcomes (Hogreve et al., 2022). In this study, we concentrate on the internal marketing side of SPC, which includes elements such as workplace design, job design, training, employee rewards, and leadership. These elements can be viewed both as resources available for effectively performing the job and serve as the foundational inputs for contributing to employee success, typically operationalised through outcomes like employee satisfaction, productivity, and retention (Hogreve et al., 2022). This analysis aims to evaluate whether these ISQ components and the employee success factors sufficiently equip employees to meet the increasingly complex demands posed by the new service work requirements in an increasingly prominent Experience Economy.
To assess these internal mechanisms, we employ two established foundational theoretical lenses from the field of HRM and organisational psychology: the Job Demands-Resources (JD-R) model (Bakker et al., 2023) and Self-Determination Theory (SDT) (Ryan & Deci, 2017). These theories enable for a granular understanding of how certain prescribed resources and HR practices interact with employee motivation, well-being, and performance which are central dimensions in delivering effective and differentiated customer experiences. The following section explains the relevance of our theoretical choices in further explaining the revised elements of the SPC framework.
While recent extensions of the SPC have increasingly incorporated constructs such as employee well-being, technostress (Hogreve et al., 2022), these approaches largely conceptualise employees as passive recipients of organisational practices (Cornelius et al., 2022). In contrast, this study advances Employee Experience (EX) as an integrative and interpretive construct that captures how employees actively make sense of job resources, demands, and organisational signals over time (Malik et al., 2023). By foregrounding employees’ lived and interpreted experiences, rather than isolated outcomes or reputational mechanisms, this framework positions EX as the central mediating process linking internal HR systems with external service performance. In doing so, the study offers a more dynamic and human-centric extension of the SPC that better reflects the realities of contemporary work.
The Experience Economy and Evolving Job Demands
Along with the technological and demographic shifts in the business environment, the rise of the Experience Economy (Malik et al., 2023) reflects a paradigmatic shift in value creation, wherein consumer preferences are no longer driven solely by functional utility or transactional efficiency, but are increasingly shaped by personally meaningful, emotionally resonant, and immersive experiences (Pine & Gilmore, 2011). In this context, organisations are compelled to move beyond standardised service delivery to design experiences that engage customers on psychological levels, thereby transforming service interactions into memorable and differentiated value encounters (Becker & Jaakola, 2020).
Service research has been proactive in addressing this shift, contributing to the development of the widely studied construct of Customer Experience (CX) (Lemon & Verhoef, 2016). However, these shifting consumer expectations have had a parallel effect on the service workforce, particularly frontline employees, by amplifying the intensity and complexity of job demands (Yoo & Arnold, 2016). Traditional job demands such as emotional labour, physical stress, and job insecurity (Schaufeli & Taris, 2014) have become more pronounced due to the accelerating pace of digital transformation, evolving service delivery models, and rising customer expectations (Midje et al., 2023; Scholze & Hecker, 2024). These stressors have been shown to adversely impact employee well-being and service quality (Ayachit & Chitta, 2022). For instance, frontline staff are frequently required to regulate their emotions in the face of customer incivility which is an emotionally taxing demand that drains psychological resources and increases the risk of burnout (Yikilmaz et al., 2024).
Concurrently, the service workforce has become increasingly multigenerational, with Generation Z entering the labour market with distinct values and expectations (Cornelius et al., 2022) .Compared to earlier cohorts, Gen Z places greater emphasis on autonomy, psychological safety, rapid career growth, and purpose-driven work, and is less motivated by traditional incentives such as tenure or job security (Schroth, 2019). When these needs are unmet, particularly due to inflexible systems or unsupportive leadership, employees are more likely to disengage or exit the organisation (Brougham & Haar, 2020).
Economic uncertainty demands that service workers navigate frequently shifting job dynamics arising from changes in consumer confidence and market volatility (Ma et al., 2024). Employees must manage the consequences of economic downturns, including increased job insecurity and fluctuating workloads (Godinić et al., 2020). Heightened customer expectations during such uncertainty can place additional pressure on employees to perform consistently under stress, straining their mental health and job satisfaction (Ersoy et al., 2023). The ambiguity related to organisational changes contributes to growing fatigue, anxiety, and psychosomatic symptoms among workers (Velez & Neves, 2016).
Taken together, these contextual shifts question the continued relevance of the legacy resources prescribed by the SPC; particularly the ISQ contributors and the outcome constructs (Figure 1) (Hogreve et al., 2022; Voorhees et al., 2020). Each of these constructs were originally conceptualised within a more stable, hierarchical, and managerialist organisational paradigm (Shet, 2024).
The justification for revisiting the SPC rests on a growing body of evidence indicating that the original model is conceptually and empirically inadequate for contemporary service environments. Recent meta-analytic research involving over 150 studies confirms that the SPC’s linear assumptions often fail to withstand multi-source data analysis, with significant inconsistencies identified in the “satisfaction mirror” (Hogreve et al., 2022). Furthermore, empirical evidence increasingly highlights non-linear and asymmetric relationships where negative performance impacts the chain more severely than positive contentment (Zeglat et al., 2024).
This study argues that the SPC framework needs to evolve to incorporate a new generation of organisational resources better equipped to address the complex and dynamic demands of today’s workforce.
An Examination of Job Resources in the SPC
Internal Service Quality (ISQ) functions as a critical mechanism through which internal management practices shape service performance and customer satisfaction (Hogreve et al., 2022). Traditionally, ISQ has been conceptualised either as a broad aggregate construct that encapsulates various HRM practices or as a set of specific indicators, such as leadership and workplace design (Voorhees et al., 2020). However, in service-intensive firms, ISQ exerts a stronger influence when HRM practices are explicitly designed to enhance service quality, rather than relying on generic approaches (Hong et al., 2013).
To address rising job demands in the service sector, scholars recommend incorporating mechanisms for real-time feedback and organisational support that go beyond traditional supervisor-employee relationships (Lechermeier et al., 2020). Such systems would empower employees and cultivate a culture of openness and collaboration, acknowledging individual needs while promoting collective goals (Lechermeir et al., 2020). Furthermore, training programs focused on emotional intelligence and resilience can enhance employees’ capacities to manage stress and effectively engage with customers amidst rising challenges (Crawford et al., 2010). Rethinking the internal service quality paradigm within the SPC framework through the lens of the Job Demands-Resources (JD-R) model offers organisations an opportunity to redefine their approaches to employee support, ensuring alignment with contemporary job demands and fostering a sustainable competitive advantage.
A critical yet underexamined dimension of ISQ is service climate, which reflects employees’ shared perceptions of their organisation’s commitment to service excellence (Lin et al., 2021). Unlike standardised production processes, service delivery is intangible, interactive, and co-produced with customers, making it difficult for organisations to monitor or regulate service quality through traditional controls (Feng et al., 2021)). However, despite its significance, service climate has not been explicitly integrated into the SPC framework, creating an opportunity to refine its theoretical foundations by linking it with customer relationship economics and other service management models (Lin et al., 2021).
Two other increasingly critical elements that this study recommends being incorporated into this updated ISQ are workplace flexibility and psychosocial safety. Workplace flexibility encompassing autonomy over time, location, and mode of work has emerged as a core determinant of EX, particularly in the wake of hybrid and remote work paradigms (Malik et al., 2025). Flexible arrangements not only enhance work-life integration but also signal organisational trust, thereby increasing employee engagement and retention (Cañibano, 2018). Similarly, psychosocial safety defined as employees’ perception that they can speak up, express concerns, and engage without fear of humiliation or retribution is foundational to a healthy work climate (Dollard & Bailey, 2021). A psychologically safe environment encourages learning, innovation, and emotional well-being (Edmondson, 2018), all of which are indispensable for meaningful service delivery in experience-driven industries.
Examination of Satisfaction, Retention, & Productivity in the Light of SDT
Self-Determination Theory (SDT) offers uniquely pertinent insights for navigating the complexities of today’s multi-generational workforce within VUCA environments. SDT emphasises the fulfilment of three innate psychological needs – autonomy, competence, and relatedness as key drivers of intrinsic motivation, well-being, and optimal functioning (Ryan & Deci, 2017). In the context of multi-generational workforces, members of different cohorts (e.g., Baby Boomers, Gen X, Millennials, Gen Z) often vary in their motivational profiles, career expectations, and preferred work modes (Ayoobzadeh et al., 2024). SDT-informed management practices such as agency, fostering mastery, and promoting collegiality allow organisations to offer differentiated motivational support that resonates across age groups (Forner et al., 2021). Importantly, in VUCA conditions, where adaptability and agile decision-making are essential, autonomy-supportive practices bolster employees’ proactive sense of agency and resilience (Forner et al., 2021; Ryan & Deci, 2017). Likewise, supporting competence, enhances up-skilling in rapidly changing roles, while relatedness nurtures cross-generational collaboration vital under uncertainty (Heyns & Kerr, 2018). Thus, SDT’s emphasis on psychological need satisfaction provides a flexible, inclusive motivational framework ideal for the current diverse and turbulent organisational landscape.
The two driving “internal marketing” variables of SPC – employee satisfaction and loyalty (retention) while widely used in organisational research and frameworks fall short when assessed through the lens of SDT. The three basic psychological needs for sustained motivation and performance: autonomy, competence, and relatedness (Ryan & Deci, 2017) are not reflected or partially reflected in the traditional SPC metrics of satisfaction, retention, and loyalty. Satisfaction is often operationalised as a general attitudinal outcome, offering limited insight into whether employees experience need fulfillment (Budie et al., 2019). Retention, similarly, is a behavioural measure that does not differentiate between voluntary commitment driven by intrinsic motivation and inertia stemming from lack of alternatives (Hom et al., 2019). Productivity, frequently quantified through output metrics, may be influenced by extrinsic controls and contingent rewards (Palvalin, 2019). Traditionally SDT warns that such a view of productivity can crowd out intrinsic motivation if not designed to support autonomy and mastery (Deci et al., 1999; Kuvaas et al., 2017). Thus, while these variables capture organisationally desirable outcomes, they inadequately reflect the motivational quality or psychological health of employees. We examine each of these variables critically.
Employee Satisfaction
The role of employee satisfaction within SPC is crucial, functioning as a fundamental component that influences internal marketing, which subsequently impacts external marketing (see Figure 1). The SPC posits that satisfied employees are more likely to deliver high-quality service, thereby enhancing customer satisfaction and driving financial performance (Hogreve et al., 2022). This relationship highlights the need to cultivate a work environment that prioritises employee satisfaction, given its direct link to organisational citizenship behaviour (OCB) (Sridadi et al., 2024). OCB encompasses voluntary actions by employees that exceed their prescribed duties and contribute to the overall effectiveness of the organisation. These discretionary efforts, which go beyond standard job expectations, play a crucial role in enhancing organisational performance (Sridadi et al., 2024). Empirical research supports this notion, with Chi and Gürsoy (2009) demonstrating that employees who feel valued and supported by their organisations are more likely to exceed customer expectations, ultimately enhancing profitability.
Revisiting Employee Satisfaction in SPC in the Light of SDT & JDR
We revisit employee satisfaction within the SPC from two vantage points. First, we review whether employee satisfaction, as conceptualised in the SPC, reliably translates into beneficial employee behaviour. Second, we interrogate the nature of employee satisfaction itself as it has been understood and integrated into the SPC framework.
The SPC rests on the fundamental premise that a satisfied employee results in a satisfied customer. However, despite the empirical support for the employee satisfaction–service quality–profitability link; findings on the strength and significance of this relationship remain inconclusive. Meta-analyses by S. P. Brown and Lam (2008) and Hogreve et al. (2017) reveal mixed evidence, with studies reporting positive (e.g., Homburg & Stock, 2004; Payne & Webber, 2006), negative (e.g., Silvestro & Cross, 2000), and non-significant relationships (e.g., K. A. Brown & Mitchell, 1993). More recently, Hogreve et al. (2022) synthesised SPC literature and highlighted that the causal relationships between employee satisfaction, loyalty, and productivity are “less clear” (p. 462) than originally suggested (e.g., Netemeyer et al., 2010). A key element of the SPC, the “satisfaction mirror,” assumes that employee emotions flow to customers, reinforcing customer satisfaction (Hogreve et al., 2022). However, empirical evidence suggests that emotional contagion effects between employees and customers are weaker than the indirect effect of employee satisfaction on customer satisfaction via external service quality (e.g., P. Cheng & Zhao, 2025).
Turning to the second vantage point, the construct of employee satisfaction as embedded in the SPC merits critical scrutiny. Contemporary human resource research differentiates between extrinsic and intrinsic motivational drivers (Chen & Chi, 2022), which in turn map onto extrinsic and intrinsic forms of job satisfaction (Chen & Chi, 2022). Yet, in its traditional usage, “satisfaction” has typically been considered as a broad attitudinal outcome, employees’ reported contentment with their job conditions, pay, or tasks (Locke, 1976). This reductionist framing risks obscuring the deeper psychological and structural factors that shape work motivation and well-being.
SDT offers a critical perspective on this limitation by positing that sustainable motivation and high-quality performance arise when three innate psychological needs are fulfilled: autonomy, competence, and relatedness (Ryan & Deci, 2017). Partial fulfilment of these needs can lead to ambiguous situations. For example, an employee may report being “satisfied” with their pay or working hours yet simultaneously lack autonomy in how their tasks are structured, experience stagnation in their professional development, or feel socially disconnected from colleagues. In such cases, SDT predicts fragile motivation and an increased risk of disengagement, even when traditional satisfaction metrics indicate positivity (Rigby & Ryan, 2018). This suggests that satisfaction, as conventionally measured, may be an unreliable proxy for sustained motivation or performance.
Similarly, the JD-R model provides an additional critique by emphasising the dynamic balance between job demands and available resources (Bakker et al., 2023). The JD-R framework underscores that employees continuously navigate tensions between escalating demands, such as cognitive overload, emotional labour, and work-life blurring and the resources that can buffer these demands, including supportive leadership, autonomy, feedback, and flexible work arrangements (Bakker et al., 2023). Employees may report satisfaction in survey snapshots, yet if demands chronically exceed resources, they are at heightened risk of burnout, withdrawal, or reduced performance capacity (Bakker et al., 2003). Satisfaction, which is typically a statically assessed construct, therefore fails to holistically capture these dynamic processes of resource depletion and replenishment, which are central to long-term engagement and service quality (Bakker et al., 2003; Harrison et al., 2006).
Additionally, workforce trends necessitate a reconsideration of how employee satisfaction is conceptualised within the SPC. The rise of protean and boundary less careers (Arthur, 2014; Guan et al., 2019) reflects employees increasing desire for autonomy and self-directed development, precisely the needs highlighted in SDT. Employees today are less likely to equate “satisfaction” with loyalty to a single organisation; instead, they pursue meaningful work, growth opportunities and balance across multiple employment experiences (Martela et al., 2021).
This study argues that while the SPC assumes a straightforward link between satisfaction and customer outcomes, the mixed empirical findings suggest that satisfaction, as traditionally measured, may not be a robust predictor of beneficial employee behaviour or sustainable organisational performance. By drawing on SDT and the JD-R model, we see more clearly why this is the case: satisfaction fails to account for whether employees’ core psychological needs are met, and it neglects the ongoing interplay between job demands and resources that shapes motivation, well-being, and performance capacity. This solicits a revised SPC grounded in need fulfilment (SDT) and resource adequacy (JD-R) which is better positioned to capture the complexities of contemporary service work.
The traditional focus on employee satisfaction within the SPC framework has been instrumental in linking employee contentment to customer satisfaction and financial performance (Heskett et al., 1994). However, our proposal that a broader construct, namely EX as a more comprehensive and effective variable in this context is timely given the changes to an employee’s ecosystem and changing aspirations. EX encompasses the entirety of an employee’s interactions with their organisation, including physical, cultural, and technological aspects of the workplace, thereby offering a holistic view of factors influencing employee engagement and performance (Malik et al., 2023). Employee satisfaction traditionally measures an employee’s contentment with specific job facets, such as tasks, compensation, and work conditions (Spector, 1985). In contrast, EX captures the full spectrum of an employee’s journey within the organisation, including growth opportunities, workplace environment, and organisational culture (Malik et al., 2023). This comprehensive approach aligns with findings that factors beyond immediate job tasks, such as organisational support and personal development opportunities, significantly impact employee engagement and productivity (Malik et al., 2023; Patterson et al., 2005). From an SDT lens, EX reflects whether the employee’s psychological needs for autonomy, competence, and relatedness (Cornelius et al., 2022) are supported through organisational practices (Farndale & Kelliher, 2013), leadership behaviours, and workplace climate (Laiho et al., 2022). From a JD-R perspective, EX captures whether the resources provided by the organisation (e.g., flexibility, development opportunities, psychosocial safety) are sufficient to balance the demands inherent in service work (Joshi et al., 2024; Malik et al., 2025).
EX provides a holistic architectural foundation for the entire internal marketing ecosystem (Brown et al., 2025; Plaskoff, 2017). Focusing on EX as a revision of the SPC provides a broader lens, as EX is not a mere state of being (like health or happiness) but the sum total of every interaction an employee has with the firm (Malik et al., 2025). By integrating EX, the model moves from asking “How do employees feel?” to assessing the design of the environment they live in, allowing for a structural JD-R analysis that proactively balances resources against modern demands like cognitive overload (Stajkovic & Stajkovic, 2024). This represents a necessary evolutionary step, shifting from a simplistic attitudinal model to a dynamic, human-centric logic fit for the digital age (Malik et al., 2025).
While EX and engagement are employed as two distinct constructs in this study, we acknowledge that practitioners often use both these term interchangeably (Malik et al., 2023). Extant literature clarifies this ambiguity suggesting that a “positive EX leads to higher levels of engagement” (Malik et al., 2023, p. 98). To use a common practitioner metaphor, the organisation “prepares the soil” (EX) so that “engagement can grow.” Temporally, the distinction is profound: EX is longitudinal, cumulative journey spanning the entire professional relationship from attraction to exit (Cornelius et al., 2022). Engagement is a present focused ongoing state measured in the “here and now”; the level of emotional connection an employee feels at a specific point of time (Budhwar & Bhatnagar, 2007). This distinction clarifies the causal mechanism: Internal Service Quality (resources) → Employee Experience (environment) → Employee Engagement (motivational response).
In sum, while satisfaction has been central to the traditional SPC, it is insufficiently robust for capturing the complexities of contemporary work. By integrating insights from SDT and JD-R, we argue for replacing satisfaction with EX, a construct that better accounts for need fulfilment, resource adequacy, and the dynamic interplay between demands and support. In doing so, the revised SPC framework becomes more diagnostically powerful, more attuned to contemporary workforce expectations, and more predictive of sustainable employee and customer outcomes.
Employee Loyalty/Retention
The SPC posits a strong link between employee satisfaction, customer satisfaction, and organisational profitability. The model assumes that investments in employee satisfaction generate reciprocal benefits towards employee loyalty leading to customers loyalty, subsequently to business performance (Hogreve et al., 2022). However, as organisations operate in an increasingly volatile business environment, with a multigenerational workforce, the traditional construct of employee loyalty within the SPC framework requires re-evaluation.
Work-life balance has also become a key determinant of employee loyalty among Gen Z. Unlike previous generations, they place a high premium on flexibility and seek to integrate personal and professional responsibilities effectively (Aggarwal et al., 2020). Many prioritise jobs that offer flexible work arrangements and a supportive environment over traditional financial incentives (Zhou et al., 2024). Organisations that implement policies promoting work-life balance are more likely to retain these employees (Brough et al., 2005). This shift highlights the need for organisations to reconsider traditional retention strategies, as loyalty among younger employees is increasingly contingent on non-monetary aspects of work. This has implications not only towards the inclusion of employee loyalty in the SPC, but also needs a rethinking of parameters that are considered to make the internal service quality.
From a theoretical standpoint, SDT and the JD-R model provide further justification for replacing loyalty with engagement in the SPC framework. Loyalty reflects an attitudinal orientation towards the organisation, often linked to tenure intentions (Meschke, 2021), but it does not capture the motivational or psychological processes that drive high performance (Meyer & Allen, 1991; Stanley et al., 2023). In contrast, SDT posits that engagement emerges when employees basic needs for autonomy, competence, and relatedness are fulfilled (Ryan & Deci, 2017). Similarly, the JD-R model conceptualises engagement as the positive motivational outcome of the balance between job demands and job resources (Bakker et al., 2023). When resources such as feedback, supervisor support, and development opportunities adequately buffer demands, employees experience vigour, dedication and absorption which are core indicators of engagement (Holland et al., 2017). Unlike loyalty, which can persist even in low performance contexts (Stanley et al., 2023), engagement directly translates into proactive behaviours, innovation and customer -focused service delivery (Christian et al., 2011). Thus, drawing on SDT and JD-R, engagement offers a theoretically grounded construct that is more closely aligned with mechanisms though which employee attitudes influence customer satisfaction and organisational profitability.
Towards a Revised SPC Framework
The changing nature of work and increasing emphasis on employee well-being call for an expanded ISQ framework that incorporates flexibility, work-life balance, and psychological safety as core components. Employee well-being extends beyond physical health; it includes psychological well-being, job autonomy, career growth, and social support—all of which contribute to higher engagement, lower turnover, and improved service performance (Voorhees et al., 2020) (Table 1 and Figure 2).
Key Revisions to the SPC Framework.
Towards a revised service-profit chain framework.
Future research should examine how HRM strategies tailored toward employee well-being – including flexible work arrangements, mental health initiatives, and holistic work-life balance policies – enhance ISQ and, consequently, service outcomes. Integrating these elements into the SPC model would enable a more sustainable, adaptive, and employee-centric approach to managing service quality in contemporary organisations.
Discussion and Implications
This study revisits the Service-Profit Chain (SPC) from an HRM and organisational behaviour perspective, proposing a revised framework that aligns with the evolving nature of work.
Traditional SPC research has long linked internal service quality, employee satisfaction, and loyalty to customer satisfaction and profitability (Heskett et al., 1997). However, rapid technological changes, a multigenerational workforce, and shifting employment relationships call for a critical reassessment of these constructs. The revised SPC framework updates key internal constructs to better resonate with today’s workforce realities. In this model, “employee satisfaction” is reconceptualised as employee experience (EX), “employee loyalty” is reframed as employee engagement, and internal service quality (ISQ) is broadened to encompass employee well-being, flexibility, and work-life balance. These changes are not merely semantic; they reflect a strategic response to contemporary demands posed by the new set of employee work preferences due to the structural shifts in their aspirations caused by the disruptions in the business environment (Malik et al., 2025). In parallel, Generation Z employees place a premium on meaningful work, continuous development, and flexible work arrangements over traditional notions of loyalty or security (Goh & Baum, 2021). By integrating EX and engagement into the SPC, the model aligns its internal drivers with these evolving expectations, providing a more relevant foundation for explaining how employee factors translate into customer loyalty and profitability in a volatile, uncertain, complex, and ambiguous (VUCA) environment.
Substituting employee satisfaction with employee experience proposes that a holistic, long-term view of the employee’s journey yields deeper insights than a narrow snapshot of contentment. While satisfaction traditionally focuses on employee’s contentment with basic conditions such as tasks, compensation, and work conditions (Spector, 1985). In contrast, EX encompasses the lived experience of employees encompassing every touchpoint and focuses fulfilment and involvement rather than contentment (Plaskoff, 2017). From the perspective of the SDT, this shift is significant. Since one of ways of looking at EX, is as an intersection of employee agency and organisational structure, it allows for the basic needs postulated by the SDT- autonomy, competence and relatedness (Ryan & Deci, 2017). Similarly, the JD-R model underscores that employees day to day experience is shaped by the dynamic balance between demands (e.g., workload, cognitive load, emotional labour) and resources (e.g., autonomy, supportive leadership, developmental opportunities) (Bakker & Demerouti, 2007). In this light EX, serves as a more robust indicator than satisfaction, capturing whether the organisation provides the structural and psychological resources necessary for employees to remain engaged in the face of high demands.
The revised framework challenges the traditional reliance on employee loyalty as a mediator between internal practices and customer outcomes. Recent studies indicate that employee loyalty, once considered a stable predictor of performance, is less relevant among Generation Y and Z employees, who prioritise meaningful work, career development, and well-being over long-term tenure (Ng et al., 2010; Solnet et al., 2012). Instead, we advocate for Employee Engagement as a more dynamic and accurate mediator. Engagement captures the intrinsic motivation, proactive behaviour, and emotional commitment that are essential in today’s volatile and complex business environment. Empirical evidence suggests that employee engagement is a stronger predictor of discretionary effort and service performance than traditional loyalty measures (Malik et al., 2023). The JD-R model positions engagement as a motivational pathway through which resources buffer demands and translates into vigour, dedication, and absorption (Schaufeli et al., 2002). This contrasts with loyalty, which can exist passively without necessary resulting in discretionary effort (Meyer & Allen, 1991).
The expansion of internal service quality to include employee well-being, flexibility, and work-life balance further strengthens the model’s foundation in light of contemporary workforce challenges. Over the past decade, factors such as mental health support, work-life integration, and schedule flexibility have moved from the periphery to the core of employee expectations (Haar et al., 2014; Heras et al., 2021). By embedding these elements into ISQ, the revised SPC acknowledges that the quality of a firm’s internal environment is not measured by training and tools alone, but also by the extent to which it fosters employee well-being and resilience. This inclusion is also theoretically supported: JD-R predicts that organisations that provide adequate resources (e.g., wellness initiatives, supportive supervisors, flexibility) are more likely to generate engaged employees capable of high performance even under heavy demands (Bakker & Demerouti, 2007). For example, studies have found that high internal service quality that consciously promotes employee well-being leads to significantly higher employee commitment, which in turn boosts performance levels (Sharma et al., 2016). Similarly, organisations that invest in work-life balance programs reap benefits in productivity and retention; such supports are shown to improve employees’ mental and physical health, reduce turnover, and enhance performance on the job (Kalev & Dobbin, 2022). Therefore, broadening ISQ to cover well-being, flexibility, and work-life balance creates a more holistic and robust first link in the chain – one that addresses burnout, stress, and work-family conflict upfront so that employees can remain engaged and productive. This change is especially pertinent given increasing job insecurity and the stress of operating in a VUCA context; by ensuring internal policies and culture promote well-being and adaptability, firms equip their workforce to maintain service quality even amid uncertainty. The revised ISQ thus captures the internal service climate in a richer way, aligning HR practices (e.g., wellness initiatives, flexible scheduling, supportive management) with the goal of sustaining a high performing, engaged workforce.
Implications
The revised SPC framework proposed in this study offers significant theoretical contributions to the service management and HRM literatures. By replacing traditional constructs of employee satisfaction and loyalty with employee experience (EX) and employee engagement, the framework broadens the conceptual foundations of internal drivers of service excellence. Additionally, the expansion of internal service quality (ISQ) to include employee well-being, flexibility, and work-life balance addresses long-standing gaps in the SPC regarding the depth and multidimensionality of internal climate factors. By integrating contemporary employee expectations into the SPC model, this study advances a renewed understanding of how internal organisational conditions shape external service quality and profitability.
Drawing on SDT and the JD-R model, the revised SPC also offers a stronger motivational foundation: EX reflects the extent to which organisations fulfil employees psychological needs for autonomy, competence, and relatedness (SDT), while engagement captures the motivational state that arises when job resources buffer job demands (JD-R). This alignment provides a theoretically coherent basis for understanding how internal conditions translate into discretionary effort, innovation, and ultimately customer loyalty. Importantly, this revised SPC framework presents an opportunity to empirically validate the interrelationships among EX, engagement and service outcomes across various contexts and industries.
Adopting this refined SPC framework carries important implications for service organisations’ HR and management practices. First and foremost, it calls for a re-examination of internal policies through the lens of employee experience. Companies should develop strategies to improve EX at every stage of the employee lifecycle – from hiring and onboarding (e.g., realistic job previews, value-oriented recruitment) to development and retention (e.g., mentoring, clear career paths, inclusive culture). Emphasis should be placed on meaningful work design, supportive leadership, work-life harmony, and opportunities for growth.
Likewise, measuring employee engagement (through surveys or pulse feedback) should become as routine as tracking customer satisfaction, since engagement is a key leading indicator of service quality lapses or improvements. By focusing on the refined constructs of the SPC, organisations can better target their internal investments: initiatives like wellness programs, employee recognition, and career development not only improve morale but also amplify the employee-customer-profit chain.
The primary recommendation for managers is to prioritise EX design over isolated engagement initiatives, as engagement is an outcome of the underlying experience (Mercer, 2024). Designing “meaningful work” creates the necessary space for engagement to occur naturally (Mercer, 2024). For managers operating under resource constraints, we recommend the following hierarchy of levers:
In summary, the revised SPC framework offers a timely and policy-relevant guide for service firms facing contemporary workforce challenges. It underscores that to achieve sustainable customer loyalty and profitability, organisations must intentionally craft an employee experience that nurtures engagement and productivity. In the current VUCA landscape, those firms that successfully implement these insights – building a culture where employees thrive and engage – will strengthen the linkage between an engaged workforce, delighted customers, and robust financial performance, gaining a competitive edge.
Limitations and Directions for Future Research
As a conceptual study, this research is limited by the absence of empirical validation of the proposed constructs and their interrelationships. However, this presents an opportunity for future research to test these relationships using quantitative and qualitative methodologies across diverse organisational settings. While EX and Employee Engagement are positioned as more suitable constructs than employee satisfaction and loyalty, their measurement and impact may vary across industries, potentially limiting the generalisability of the revised Service-Profit Chain (SPC) framework.
Moreover, EX is a relatively new construct, gaining increasing attention among HRM and OB scholars. As research on EX evolves, it may necessitate further refinement of the SPC model, offering new insights into how EX interacts with service performance and customer outcomes. While EX and Engagement are central, we acknowledge they are part of a larger ecosystem of cultural and structural influences. Further expansions to the SPC could include organisational culture, which acts as the “social glue” that determines how HR initiatives are received and can act as a multiplier or a barrier to the SPC (Ahmad et al., 2021). Similarly, leadership style is another powerful driver, with managers having a considerable influence on team engagement levels (Thanh et al., 2022). Furthermore, contemporary studies show that when job design is poor (e.g., high repetition or cognitive overload), no amount of engagement initiatives will yield a positive experience (Stajkovic & Stajkovic, 2024).
Additionally, this study does not explicitly account for external factors – such as organisational culture, economic conditions, and industry-specific constraints – that may influence EX and internal service quality (ISQ). These factors have been broadly generalised under the ISQ construct, which may require more nuanced exploration in future studies. Addressing these gaps through empirical investigations will contribute to a more comprehensive and context-sensitive understanding of the SPC framework in contemporary workplaces.
Footnotes
Funding
The authors received no financial support for the research, authorship, and/or publication of this article.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.