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Are All Nonfinancial Performance Measures Created Equal? Evidence on Customer Satisfaction and Employee Satisfaction Measures from the Homebuilding Industry
Clara Xiaoling Chen, University Of Illinois At Urbana - Champaign
Melissa Martin, University of Southern California
Kenneth A Merchant, University of Southern California
ABSTRACT. We test the business model of a company in the homebuilding industry using its monthly customer satisfaction, employee satisfaction, and financial data for over 200 projects for the period 2001-2004. We find that: 1) Customer satisfaction measures provided by an industry-specific customer research firm have greater predictive ability than those provided by a national multi-industry customer research firm; 2) Overall employee satisfaction is not a significant leading indicator of customer satisfaction or financial performance, but sales employee satisfaction is positively associated with customer satisfaction; and 3) Both customer and employee satisfaction are comprised of distinguishable dimensions with differential impact on other variables in the business model. Our findings suggest that the validity of a business model depends not only on the soundness of the underlying theory, but also on how well the variables in the business model are measured.
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