Impact of service quality and satisfaction on employee loyalty: An empirical investigation in indian SMEs

Abstract

This study uses a hybrid scale to identify the factors contributing to internal and external service quality at employer-employee interface in the SMEs of emerging economies like India. 144 shop floor workers and executives working in different SMEs situated in northern India participated in an interview schedule to rate the quality of services being offered to (and delivered by) the employees in such units on 1-5 Likert scale. Application of factor analysis followed by Structural Equation Modelling developed a model showing how organization’s HR practices influences employee service quality which consequently leads to Satisfaction and Loyalty which are the established indicators of competitive advantage for such firms. The model is empirically validated using model fit indices and is found satisfactory. This paper thus proposes an empirical framework for the measurement of employee service quality in a relatively less explored sector. This study finds support for strengthening relationships with employees to achieve a culture of achievement in SMEs. The two scales proposed in this study can be used as benchmarks by SME practitioners for evaluation of services being offered to (and delivered by) their employees. The methodology used may be applied in more such settings for evolving a generic and tailor-made scale.