Abstract The purpose of this study is to examine links between, on the one hand, employee satisfaction, loyalty and performance, and on the other, the relationship between customer satisfaction and loyalty, as well as their inter-relationship. We conducted a study with employees (53 employees) and students (262 students) across seven departments of a private university in a developing European country. In order to test the cross-level effects of employee-level constructs on student-level constructs, a multilevel analysis was conducted using hierarchical linear modeling. The results confirmed the positive effect of employee satisfaction on employee loyalty and employee performance, but not the impact of the employees’ loyalty on their performances. At the same time, the results showed that students’ satisfaction was positively related to loyalty. Finally, the results showed that, unlike employee performance, employee loyalty at the level of the department had a positive and significant impact on the students’ loyalty and also enhanced the effect of students’ satisfaction on student loyalty.

Introduction: The purpose of this study to investigate internal service quality (as perceived by employees) and external (customer) perceptions of quality in the context of service profit chain (SPC).Objective: The objective of the study is to evaluate the impact of internal service quality on students’ perceptions of quality and to test the significance of a direct link between internal and external service quality.Methods: We measured the perceived service quality using a SERVPERF instrument and the multilevel modeling approach with HLM 7.01.Results: The empirical findings support a link between perceptions of internal and external service quality. We show that when employees (faculty) perceive university services as being of high quality, it has a positive spill-over effect on students’ overallperceptions of the quality of university services. Perceptions of internal service quality are also positively related to students’ perceptions of reliability, responsiveness and quality assurance.Conclusions: The perceptions of internal service quality by faculty members are positively related to students’ perceptions of quality. Comparing the levels of internal and external service quality will help managers define priorities for allocating resources to improve quality.