The paper focuses on determining the impact of employee empowerment on service quality and customer satisfaction in the banking sector of Pakistan. The data was collected from a random sample of middle and lower management staff and the customers of the banks through questionnaires. Statistical techniques such as factor analysis and correlation analysis were employed for data analysis. The study suggests a positive relationship between employee empowerment, service quality and customer satisfaction. This implies that employee empowerment results in higher level of service quality and customer satisfaction in Pakistani banks.

Service sector plays a significant role in the development of an economy. The front-line employees in service organizations, who have direct contact with their customers, serve as the representatives of their firm’s products or services. In Pakistan, nowadays, the service sector in general and the banking sector in particular, are emphasizing on the service quality and customer satisfaction. Substantial funds are being utilized on quality management. Employee empowerment improves service quality, which ultimately results in customer satisfaction. In the banking sector, without empowerment, employees lack confidence, creativity and get bounded, which leads to underperformance. Employees will only be successful in dealing with their customers when the management gives authority and necessary support to them, which is termed as “employee empowerment” (Peters and Mazdarani, 2008). The practice of employee empowerment directly affects the quality of services delivered and customer satisfaction. Hence, companies today know that they can compete effectively by making themselves more distinct with respect to service quality and customer satisfaction.

Geralis and Terziovski (2003) suggest that banks must concentrate on improving their performance because the customer expectations and the competition among the banking sector increase with the passage of time. This is only possible when the top management focuses on employee participation in decision making and problem solving for the improvement of the service quality outcomes. Furthermore, empowering employees makes them satisfied with their jobs and hence enables them to provide the right kind of service, which ultimately results in customer satisfaction.

After a brief introduction, the paper discusses the literature review, followed by research methodology. The subsequent section deals with data analysis and results. The last section of the paper offers conclusion and future recommendations.

Bank Management Journal, Indian Banks, Asset Liability Management, Data Filtering, Least Absolute Deviation, Decision-Making Group, Commercial Banks, Ordinary Least Square, Banking Industry, Kenyan Banks, Least Squares Regression, Mutual Fund Industry, Linear Programming, Financial Markets, Capital Required Adequacy Ratio, Public Sector Banks.