Research and concepts

Measuring internal
customer satisfaction
G. Ronald Gilbert

Purpose
The purpose of this paper is to analyze the
effectiveness of the perceived performance of
work units based on the perceptions of those
they serve in the organization their internal
customers. The paper will identify measures
to assess internal customer service and test the
degree to which employees who comprise the
internal teams can accurately predict how
effective they are from the perception of their
internal customers.

Background
The author
G. Ronald Gilbert is at the Department of Management
and International Business, Florida International
University, Florida, USA.
Keywords
Customer satisfaction, Measurement, Service quality
Abstract
Identifies two empirically derived measures of internal
customer support used to assess team effectiveness from
the perspective of the team's internal customers. The
measures, personal service and technical competence, are
based on analysis of the responses of 465 individuals
representing 150 internal customer teams. When
compared, the expected (self) ratings of the members of
internal intact work teams were more positive than those
ratings actually attributed to them by their internal
customers. The findings reveal members of work teams
tend to over estimate the effectiveness of their team's
performance when compared with the ratings the same
teams receive from their internal customers. The
measurement of internal customer satisfaction is a tool
that can be a useful aid for managers of service quality
and their work teams to help them more accurately
measure the effectiveness of their units.
Electronic access
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Managing Service Quality
Volume 10 . Number 3 . 2000 . pp. 178186
# MCB University Press . ISSN 0960-4529

To survive in highly competitive markets,

organizations need to provide goods and
services that yield highly satisfied and loyal
customers. When customers are satisfied,
they are more likely to return to those who
helped them, while dissatisfied customers
are more likely to go elsewhere. The
retention of very loyal customers is key to
organizational survival (Jones and Sasser,
1995). Thus, organizations are challenged
to create demand for their products and
services through outstanding customer
support. To attain sustained excellent
external customer support requires internal
systems that are aligned to serve the external
customer, with each internal subsystem
adding value to others within the
organization who are dependent on it; as
though the other subsystems were its customers
(Deming, 1986).
Extensive research has been conducted on
the characteristics and quality of
organizational effectiveness from the
perspective of those who are the
organization's external customers
(Parasuraman, et al., 1988; Zeithaml, et al.,
1996; Fisk, et al., 1993; Bojanic, 1996;
Nicholls, et al, 1993, 1998; Taylor, 1994).
Much less has been reported about
organizational effectiveness from the
perspective of internal customer
satisfaction. Yet, effective internal supplierto-customer relations are essential
With regard to ``Measuring internal customer
satisfaction'' for publication in Managing Service
Quality, although copyright for the article is
assigned to MCB University Press, MCB
University Press agrees not to limit in any way the
author's use of the descriptors of factors used in the
study.

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G. Ronald Gilbert

prerequisites to the level of quality service

that yields sustained external customer
satisfaction, loyalty, retention and longterm financial success.
As depicted in Figure 1, the service-profit
chain focuses attention on the causal
relationships between the quality of the
organization's internal systems that lead to
satisfied and loyal employees who, therefore,
provide better quality service to the
organization's external customers. As a result
of this internal organizational chain of events,
customer satisfaction occurs which leads to
long-term financial gain for the organization.
Focus on work teams
The collective performance of individuals in
organizational work teams is now a common
area of emphasis in organizational behavior
and literature focused on improving
organizational quality. Most emphasis in this
area is aimed at improving the internal design,
structure and behavior of intact teams
(Scholtes et al., 1996; Orsbun et al., 1990).
However, in addition to intra-teamwork,
some organizational development specialists
also place emphasis on inter-group (team-toteam) functioning. In this regard, inter-group
teambuilding is an intervention designed to
enable two or more teams to improve their
working relationships with one another by
increasing the awareness of how each group
perceives the other (Schermerhorn et al.,
1998). Gilbert and Nelson (1991) have
detailed how multiwork teams that comprise
primary organizational work processes are
brought together and, in supplier-to-customer
like relationships, the teams learn from one
another how to serve each other more
effectively, ``interacting as one another's
customers''. By doing so, waste is reduced,
morale improves, and both inter-team and
intra-team dynamics are strengthened. There
is increasing emphasis being placed on work
team evaluation (Zignon, 1994;
Schermerhorn et al., 1998) as a means to
improve inter team performance.

Role theory: a framework to use to assess

the effectiveness of work teams
Katz and Kahn (1978) identified the
organization as an open system that is
structured by the interaction of individuals
and subsystems carrying out specific roles in a
highly interdependent manner which Katz
and Kahn termed role sets. Roles are sets of
behaviors that persons expect of a position
(Graen, 1976). Note: While the basis of role
theory was focused on the roles individuals are
perceived to play, role expectations are also
placed on work units in organizations by
others, as well (i.e. individuals in the
workplace have role expectations of the work
units, such as accounting, human resources,
production, engineering and the like). In this
paper, the term role set is centered on role
expectations individuals within a work unit
have of the unit, itself, and the expectations
others who represent the focal work unit's
internal customers.
According to Katz and Kahn, role
relationships are at the core of organizational
effectiveness. Key to effective role behavior is
the process of ``. . . learning the expectations of
others, accepting them, and fulfilling them''
(Katz and Kahn, 1978, p. 188). As depicted
in Figure 2, an individual or group
functioning within a role set is termed the
focal unit. The focal unit is at the core of the
role set. The other units within the role set
Figure 2 Depiction of a role set

Figure 1 The service profit chain

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G. Ronald Gilbert

function interdependently with the focal unit

and, combined, those in the role set function
together as a larger system to accomplish
common aims. When employees' beliefs
about what they are supposed to be
accomplishing on the job and how well they
are doing are accurate, they behave more
effectively (Wagner and Hollenbeck, 1998).
Work units within organizations are vital
subsystems that need to be aligned to serve
the greater good of the organization. The
collective work of those in the organizational
units or work team needs to meet the role
expectations of those in other work teams that
comprise their role sets.
The effectiveness of a focal unit (work
team) within a role set is based on two factors:
(1) The degree of congruity between the
behavioral role expectations those in the
role set have of the focal unit, and the
focal unit's own behavioral expectations
of itself.
(2) The actual behavior of the focal unit as it
carries out its role expectations as defined
by others in the role set.
Role theory can be used to analyze the
effectiveness of internal systems within the
framework of the service-profit chain. For
example, an accounting department
functioning within an organization may serve
as a focal unit of analysis. Those in the
accounting department's role set may include
five separate operating departments, such as
the office of the chief executive officer (CEO),
and the operations, human resources,
marketing and the procurement departments.
Each of the units in the role set have
expectations of the accounting department.
The accounting department has expectations
of itself, and attempts to behave accordingly.
According to role set theorists, an accounting
department that clearly understands what is
expected of it by those in its role set (the
accounting department's internal customers),
and is in concurrence with such role
expectations, and behaves as expected, would
be functioning effectively in the
organizational system. Contrarily, an
accounting department that acts entirely
different than what is expected of it by its
internal customers in its role set would be
viewed as ineffective.
The measurement of customer satisfaction
as a means to determine organizational
effectiveness can be explained by role theory.

Customers have service expectations of an

organization. Organizations are obliged to
serve their customers. In the eyes of the
service-profit chain theorists and champions
of organizational quality, the closer the
organization behaves in terms of what is
expected of it by its customers, the more
effective the organization. Similarly, and
directly related to this research effort, the
effectiveness of internal organizational service
units can be measured by the degree of
satisfaction of its performance by its internal
customers (role set members). When
members of internal organizational units
satisfy the needs of their unit's internal
customers, they also are enabling their
internal customers to perform their tasks. By
doing so, the network of organizational units
are more apt to work effectively together to
accomplish the overall customer service aims
of the organization.
Given this overview of role set theory as it
pertains to organizations, the effectiveness of
internal systems will be examined. In the
remainder of this paper, two research
questions are raised, the methodologies used
to measure internal customer service are
presented, results from data analyses are
discussed, and a summation of the study
findings along with implications for future
research are addressed.
Research questions
(1) Can measures be used to determine the
effectiveness of internal work teams from
the perspective of their internal
customers?:
and if measures are identified to assess
internal customer satisfaction, then:
(2) Do differences exist between how
employees in such work teams estimate
how their internal customers rate them
and how their internal customers actually
rate them?

Methodology
Over the past ten years, when working with
over 500 intact work teams, this author
observed and recorded problems members
of teams (internal customers) identified
with the service they received from other
teams within their organization. The
problems expressed from team-to-team

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G. Ronald Gilbert

were based on services or products needing

improvement in order to serve the
organization's external customers more
effectively. This practical experience
provided a reference point from which this
research was undertaken. As a result of this,
and a review of literature dealing with
external customer satisfaction measures
reported by others, an internal customer
assessment of team performance
questionnaire was developed. It included 15
statements pertaining to service quality and
one overall statement pertaining to the
internal customer's overall rating of the
service received. A seven-point Likert-type
scale was used in the survey instrument
ranging from 1 = strongly disagree to 7 =
strongly agree. Zero was also included in the
scale as an added option indicating the
respondent had ``no opinion''.
Two versions of the questionnaire were
created. Version one was completed by
employees in work units identified by a work
team as the work team's internal customer.
The version one questionnaires were
pre-coded to identify the specific team in
which each internal customer belonged. That
is, all employees responding from one internal
customer work team were classed so their
individual responses could be aggregated and
averaged as a team. Version two was
completed by the employees in the focal unit
under analysis. The statements in versions
one and two were identical. The customers of
the internal work teams receiving the services
from the focal units (completing version one)
were asked to rate overall performance of the
entire focal group. The members of the focal
group completing version two were
individually asked to estimate how each team
among their internal customer groups would
rate the effectiveness of their entire team (the
focal group) as service providers.
Using the example previously given of an
accounting department, the members of each
of the five operating departments, the CEO's
office, human resources and the purchasing
department would have completed version
one of the customer assessment for team
performance instrument. The employees who
worked in the focal unit of analysis (i.e.
accounting department) completed version
two of the questionnaire as to how they
thought each of the five operating
departments, the CEO's office, human

resources and the purchasing department

would rate them.
Study sample
The study sample consisted of 24 focal groups,
with each having the members of three or more
internal customer teams assessing them. Table I
identifies each of the internal customer service
teams (focal groups), the functional roles of the
internal customer groups that assessed them,
the sample sizes of each focal group, and
combined number of responses from their
internal customer groups. The sample included
12 focal units within a sports entertainment
organization and 12 focal groups from 12
different organizations. Combined, 465 internal
customer respondents completed version one
questionnaires and 484 employees working in
the focal units of analysis completed version two
questionnaires. The samples were obtained by
gaining approval of the senior person in charge
of each focal group, and then training an
internal member of the organization to assign
code numbers to the questionnaires and
administer them to all units involved, while
assuring the confidentiality of each respondent.
In response to research question No. 1: Can
measures be used to determine the effectiveness of
internal supplier teams from the perspective of
their internal customers? Once the data were
entered, a factor analysis was employed using
principal components and varimax rotation
procedures to empirically derive factors for
use as measures of internal customer
satisfaction. Table II reveals brief descriptions
of the questionnaire items, and the factor
loadings identified based on the completed
465 internal customer responses.
Table II reveals the results from the factor
analysis statistical procedure using the SPSS
Version 8.0 (1998). It identifies two measures
that comprise statements of internal customer
satisfaction based on responses from 465
employees comprising 150 internal customer
teams. Variables with factor loadings at the
0.55 level or higher were considered
acceptable, while having no loading at the
0.40 level or higher on the other measure
identified.
The two measures identified through the
factor analysis application are termed:
technical competence (measure 1) and
personal service (measure 2). Reliability
alphas for measures 1 and 2 are 0.92 and
0.88, respectively, indicating strong internal
consistency among the variables that

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Table I Description of study sample

Type of focal group
1
2
3
4
5
6
7
8

Principal's office
County Budget Office
Auto parts headquarters
Plant management team
Accounting department, tourism
Management team, catering
Attorneys in law firm
Customer service department, food
distribution
9 Accounting department, public
relations
10 Accounting department, spirits
11 Waiters, cafe
12 Accounting department, resort
13 Marketing
14 Senior management

15 Accounting
16 Maintenance
17 Sports
18 Tickets
19 Admissions
20 Security

21 Publicity

22 Grounds
23 Customer service
24 Food and beverage

Number per
focal group

Number of
internal customers

Teachers, parents, office staff

Finance, county manager, board staff
Five franchise shops
Three operations groups
Customer accounts, sales, regulations, product development
Bartenders, kitchen, servers, captains
Secretaries, law clerks, accounting

3
27
16
3
10
11
12

21
25
15
27
30
13
12

Managers, sales, pricing

Executive offices, sales, video, art, production

13
26

10
20

Data processing, sales, purchasing, orders

Management, cooks, hosts, bussers, bartenders
Membership, golf, tennis, food and beverage
Maintenance, sports, tickets, admissions, security, publicity,
customer service, food and beverage
Marketing, accounting, maintenance, sports, tickets,
admissions, security, publicity, grounds, customer service,
food and beverage
Marketing, senior management, maintenance, sports, tickets,
admissions, security, publicity
Marketing, senior management, accounting, sports, tickets,
admissions, security, customer service, food and beverage
Senior management, accounting, maintenance, publicity,
grounds
Marketing, senior management, accounting, security,
customer service
Marketing, senior management, accounting, security,
customer service
Marketing, senior management, accounting, maintenance,
sports, tickets, admissions, publicity, customer service, food
and beverage
Marketing, senior management, accounting, maintenance,
sports, admissions, security, customer service, food and
beverage
Senior management, maintenance, sports
Marketing, senior management, maintenance, sports, tickets,
admissions, security
Marketing, senior management, accounting, maintenance,
grounds

42
65
19

37
24
12
23

Type of internal customer

comprise each measure. Tests to assess the

internal validity of each of these measures
with the raters' responses with an overall
statement (overall, the service I receive from this
team is excellent) were administered through
the application of the Pearson correlation
procedure. The association between the
respondents' ratings of the overall statement
and their ratings on technical competence and
personal service were r = 0.85 and r = 0.71,
respectively. Based on the above, the two

18

44

38

27

31

57

36

16

16

28

23

20

16

30

40

53
9

31
14

11

26

22

measures can be used to assess internal

customer satisfaction with the service and
products provided others by work teams.
In response to research question No. 2: To
gain further insight into research question
No. 2: Do differences exist between how
employees in work teams estimate how their
internal customers rate them and how their
internal customers actually rate them?
Comparisons were made between the
responses of the internal customers to version

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G. Ronald Gilbert

customer sample. Among the six variables

that comprise the technical competence
measure, two were found to be rated
differently between the two groups V06,
``prompt service'' (P = 0.019) and V14,
``dependable'' (P = 0.008). The two variables
where least difference was found among the
two groups were V10, ``highly competent'',
and V12, ``demonstrate high expertise''.
Overall, these empirical findings indicate
that the expected (self) ratings of employees
working in the focal groups will be more
positive than the ratings attributed to them by
their internal customers.

Table II Internal customer satisfaction measures identified

Questionnaire variable
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Effective welcome
Timely greeting
Shows courtesy
Treats me as a partner
Ease of use
Prompt service
Listen to needs
Acts professionally
Easy to contact
Is technically competent
Pleasant to work with
High expertise
Does things on time
Is dependable
Does not waste my time

Measure No. 1
loading

(0.60)
0.72
(0.52)
(0.56)
(0.54)
0.80
(0.46)
0.77
0.81
0.84
0.78

Measure No. 2
loading
0.85
0.79
0.86
0.66
(0.49)
(0.58)
(0.52)
(0.47)
(0.68)

Discussion of study findings

Note: Variables in parentheses were loaded on both factors. They were

not included in the two measures derived because they failed to meet
acceptable standards of independence (Comrey, 1973), and factor
loadings previously described. All other variables were found to be highly
associated with one of the two measures derived, with Measure 1
comprised of six variables and Measure 2 comprised of four variables

one of the questionnaire with the estimates

employees made of what they thought the
average score individuals in their internal
customer groups would actually rate them
(version two).
Table III identifies differences found
between the expected ratings assigned by the
focal group and the actual ratings attributed
by the internal customer groups to the quality
of service provided the focal groups. It also
identifies the student t-ratio and statistical
probabilities identified per the application of
the student t-test for independent samples.
Significant differences were found between
the ratings of the focal groups and internal
customer groups on both the personal service
(P = 0.005) and technical competence
(P = 0.036) measures. In both of the two
internal customer service measures identified
in this study, the focal groups' expected
ratings were significantly higher than were
their internal customers' ratings of them.
Analysis of the ratings by the focal groups and
internal customer groups revealed that the
focal groups' ratings were higher than the
internal customers ratings on all 12 variables
that comprise the two major factors. As
revealed in Table III, each of the four
variables that comprise personal service was
rated significantly higher by the focal group
sample when compared to the internal

This paper has identified two empirically

derived measures of internal customer
satisfaction:
(1) personal service; and
(2) technical competence.
When those in the focal groups were asked to
estimate how their internal customers would
rate them on the two measures derived in this
study, their estimates were significantly higher
than the actual ratings attributed to them by
their internal customers. Thus, their
perceptions were distorted.
The ratings from most work teams (focal
units) tended to estimate the collective level
of internal service quality provided by them
to be higher than how they were actually
rated by their internal customers. Thus, the
self-assessments of internal work teams by
those working in them was distorted when
compared with the perceptions of their
actual performance by their internal
customers. Thus, if generalized, the data
suggest that individuals in work teams may
be relying on assumptions that their own
work units are serving their internal
customers acceptably, when, in fact, they
are not providing the services and products
needed by their internal customers to carry
out their own work assignments as part of
the service-profit chain. As a result,
eventual breaks in the service-profit chain
and failed service to the organization's
external customer occur.
Implications for practitioners
Based on this discrepancy in performance
ratings between focal units and their

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Table III Differences in perceptions between occupants of focal roles and their internal customers on variables
measured by the customer assessment of team performance survey instrument
Sample size

Mean

Std Dev.

t significance

Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customers
Focal group
Internal customer

451
450
459
479
461
476
465
476
459
465

5.44
5.25
5.52
5.32
5.49
5.28
5.60
5.42
5.17
4.98

1.03
1.10
1.21
1.32
1.19
1.27
1.13
1.21
1.31
1.36

2.57

0.005

2.36

0.009

2.58

0.005

2.33

0.010

2.23

0.013

Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customer
Focal group
Internal customer

442
433
455
469
459
468
462
474
459
464
462
474
457
469

5.46
5.33
5.26
5.08
5.55
5.49
5.56
5.55
5.25
5.11
5.57
5.38
5.52
5.38

1.00
1.10
1.20
1.39
1.21
1.24
1.22
1.18
1.29
1.41
1.12
1.27
1.26
1.32

1.80

0.036

2.08

0.019

0.85

0.019

0.15

0.439

1.58

0.057

2.42
1.58

0.008
0.057

Factor/variable

Raters

Personal service
V1
V2
V3
V4
Technical competence
V06
V10
V12
V13
V14
V15

Notes: Mean ratings based on Likert-type scale, 1 = strongly disagree; 7 = strongly agree; significance based on
1-tailed test

internal customers, any or all of the

following might be initiated within the
organization to help close the gap between
members of work teams serving internal
customers and how their internal customers
actually rate them:
(1) Create objective output measures of the
service quality of work teams (focal
groups). These measures need to be
credible and deemed valid by those being
measured.
(2) Use these measures to evaluate the
performance of work teams.
(3) Expose the work teams to such data once
obtained so the members of these teams
can learn and find ways to improve their
performance.
(4) Compare the self-ratings of work team
members with the ratings of their
internal customers to identify areas
where distortion is most prevalent, and
then identify the contributing factors
relating to such discrepancies.
(5) Temporarily assign employees to their
internal customer groups so they may

gain greater understanding of their own

focal groups' performance from the
perspective of their internal customers.
(6) Craft new means to identify
organizational barriers that contribute to
failed internal customer service and then
develop responsive means to eliminate
them once they are identified.
(7) Enable internal customers to have more
realistic expectations of their internal
suppliers.

Summary
The purpose of this paper was to identify
generic measures that can be used to assess
internal customer support by work teams. A
comparison of perceptions of those who
actually perform the work and those who are
their internal customers revealed a
perceptual bias among those being
evaluated, where the subjects of the
evaluation viewed themselves to be

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G. Ronald Gilbert

performing more effectively than did their

internal customers.
The findings are consistent with research
in perceptual distortion and self-rating bias
and further supports the need for internal
customer service assessment. Such selfrating bias has been found in studies where
the perceptions of those occupying leader
roles were compared with the assessments of
them by their subordinates (Bass and
Avolio, 1988; Birnbaum, 1986; Nanko,
1981). When analyzing employee
performance, Gilbert (1990) found
significant differences between the expected
ratings among observed employees and the
actual performance ratings of them by their
supervisors and project leaders. In these
studies, those who were the subject of
evaluation rated themselves higher than how
they were rated by those whom they were
intended to serve. We term this
phenomenon self-serving perceptual
distortion. As such it helps explain the
findings in this study, i.e. individuals in
work teams tend to view their own
performance to be more effective than how
they are actually rated by those who
comprise their internal customer groups.
Given this tendency to favorably distort
information about oneself and one's own
team, it provides compelling justification for
members of work teams to identify their
internal customers and seek feedback from
these customers to gain greater clarity about
their own team's performance.
When members of a team's own sense of
performance effectiveness is higher than that
perceived by their internal customers, the
team will fail to focus on needed areas of
improvement. This will lead to breaks in the
service profit chain that is vital to overall
organizational service quality for the external
customer.
While two generic measures were identified
in this study of internal customer service,
other measures might also be developed to
enable work teams to learn about their
performance so they may serve their internal
customers more effectively. Additionally,
more research is needed to identify the effects
that perceptual discrepancies found between
those in focal units and those occupying roles
as internal customers have on overall
organizational performance. It is suggested
that the greater the discrepancies between the
more favorable ratings by those in the focal

units and the lower ratings by those

representing their internal customers, the less
effective and more inefficient the
organization. This hypothesis needs to be
tested through additional research in a broad
range of organizations.

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