A cross-lagged test of the association between customer satisfaction and employee job satisfaction in a relational context

Due to its practical importance, the relationship between customer satisfaction and frontline employee (FLE) job satisfaction has received significant attention in the literature. Numerous studies to date confirm that the constructs are related and rely on this empirical finding to infer support for the "inside-out" effect of FLE job satisfaction on customer satisfaction. In doing so, prior studies ignore the possibility that-as suggested by the Service Profit Chain's satisfaction mirror-a portion of the observed empirical effect may be due to the "outside-in" impact of customer satisfaction on FLE job satisfaction. Consequently, both the magnitude and direction of the causal relationship between the constructs remain unclear. To address this oversight, this study builds on multisource data, including longitudinal satisfaction data provided by 49,242 customers and 1,470 FLEs from across 209 retail stores, to examine the association between FLE job satisfaction and customer satisfaction in a context where service relationships are the norm. Consistent with predictions rooted in social exchange theory, the results reveal that (a) customer satisfaction and FLE job satisfaction are reciprocally related; (b) the outside-in effect of customer satisfaction on FLE job satisfaction is predominant (i.e., larger in magnitude than the inside-out effect); and (c) customer engagement determines the extent of this outside-in predominance. Contrary to common wisdom, the study's findings suggest that, in relational contexts, incentivizing FLEs to satisfy customers may prove to be more effective for enhancing FLE and customer outcomes than direct investments in FLE job satisfaction. (PsycINFO Database Record