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Chapter 6

Service processes and their importance

A service process is the set of interrelated tasks or activities that together, in an appropriate sequence, create the service. It is important to note that when we are talking processes we are not simply referring to the point that where the customer is receiving the service, it’s about managing a chain of processes from start to finish rather than managing the final step of the process, where importance lies in managing both front and back office processes.

Front office deals directly with the customer and may be visible to them. The processes

might provide personal interaction with service employees, or interaction through

technology. Front office has one common problem: the unpredictability of the customer.

Back office operate at a distance from the customer and are largely invisible for them, these

processes don’t have to deal with the complication of having the customer present and

therefore frequently more efficient.

Good service processes not only create satisfied customers but also reduce costs, enhance the value-added and underpin financial performance. There are a wide range of customer variables that will complicate the customer experience,

some of these are customer mindset, customer mood and personal clashes. All these factors

must be taken into account when designing the experience/process and its day-to-day

management.

Processes must be understood and managed end-to-end (e2e) in order to provide the desired outcomes and experience for customers. Failure to manage e2e activities leads to inefficiencies across the entire organization leading to a lack of consistency, poor reliability in terms of quality and lead times, and increased costs. Service managers must therefore not only deal with the individual issues in managing the

back office- and front office processes, but also deal with the integration of activities across

the chain.

The servicescape is a key ingredient of service process design and has significant impact on customers and employers. The servicescape is used to describe the physical surroundings of the service operation and includes the environment for back- and front office staff and customers. The servicescape can: affect the customer’s experience, influence the behavior of customers

and influence employees.

The nature of service processes Runners, repeaters and strangers help identify the extent of variety to be dealt with by the

process.

Runners are standard activities predominantly found in high volume operations; they are

often relatively predictable and lend themselves to efficient operations through tight process

control or automation.

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Repeaters are also standard activities, possible more complex than runners but occur less

frequently and they often absorb more resources than equivalent runners.

Strangers are non standard activities; they are the most difficult process for service

managers to deal with because: difficult to forecast demand, required resources may be less

certain and least efficient and most difficult process.

Value may be added in the front office or back office or both, with varying degrees of customer involvement.

The volume-variety matrix helps identify the key attributes of service processes and the implications of attempting to deal with a wide range of tasks with one process (see picture p.197 3ed.) The variety matrix consists of four main processes:

Capability processes: Are focused on providing a capability for their customers rather than

pre-pared service, this kind of process may be more suited to deal with strangers than

runner.

Commodity processes: Are ideal for runners, these operations are exemplified by the high

volume consumer service such as fast-food processes. The service concept for these

organizations is of necessity and relatively rigid.

Complexity processes: Are providing high-volume services that are capable of great flexibility,

attempting to provide customers with whatever they want, however they want it and

wherever they want it at an affordable price.

Simplicity processes: The issue here is that the operation is unlikely to be operating as

efficiently as it might because of its low volume, this process might suit a small niche players.

Process profiling can help identify what needs to be changed to reposition a process. Processes with low customer involvement are:

The service factory: Efficient high volume operations, front office makes it seem friendly, the

customer is trained to fit into different services, efficient and consistent but not personal.

Service projects: Close links between front- and back office, more skill and flexibility and

technical as well as interpersonal skills.

Processes with high customer involvement are:

Do it yourself services: High volume and low variety processes ideal for runners and repeaters

with high customer involvement.

Service partnership: Involve highly customized service processes with high customer

involvement, dealing either with strangers or repeaters. Clients are intimately involved,

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effectiveness is a function of personal chemistry between individuals involved and the

challenge is to manage the communication between front and back office

Tools to engineer service processes and the customer experience It is important to identify and manage end-to-end processes. Managers of service processes

easily get used to seeing- and therefore – ignoring poor processes, thus missing the experience i.e. design new service processes.

Four tools that are effective in helping ‘engineer’ service are process mapping, emotion mapping, walk-through audits and customer experience analysis.

Process mapping is the charting of a service process in order to assist in the evaluation, design and development of new existing processes.

Walk-through audits acts as surrogate customers and might help evaluate and improve the

service. The audit should be based on a checklist of questions that guide the ‘customer’

assessment of the complete service.

Emotion mapping, tools above take an organizational approach of a process. One way to help

managers to take a more customer focused perspective is to consider one key outcome of

the customer experience; emotions. Emotion mapping charts the emotions elicited by each

stage of the process. Emotion mapping develops the process maps by adding emotions felt

during each step of the service process.

Customer experience analysis is a development of the walk through audit and emotion

mapping. It incorporates the service concept, the customer experience, transaction quality

assessment and the emotions felt but the customer in order to provide a simple but powerful

tool to asset and improve the customer’s experience of the service process ( for an example

see p. 216, fig 6,14).

Controlling service processes Reliability and consistency are important to most service operations and their customer.

Most service organizations report that consistency is one of the most important factors in influencing the customer experience, meaning “saying what you do and doing what you say”. This section describes two aspects of control: capable processes and the role of quality systems, such as ISO 9000.

Capable processes can be treated through the implementation of statistical process control (SPC). SPC works in the same way as we learned in the tek145 course.

Quality systems should not only provide process definition, but should also be the catalyst for quality improvement. High volume ‘commodity’-type services whose processes tend towards runners and lend themselves most naturally to the quality systems approach. This

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because processes can be mapped and clear, consistent standards can be established and monitored throughout service production and delivery

Repositioning service processes There are on many processes to change their nature. High-variety/low-volume capability

operations dealing with strangers may be under pressure to increase volumes and/or drive down the high costs of operating such processes.

Organizations must change the gap between what is marketed and what is delivered. To be able to hold what’s marketed, change might be the only solution to be able to survive.

The majority of service operations don’t lie at the extremes of the diagonal. For those in the central of the spectrum, between capability and commodity, there are four basic strategies to deal with transition at whichever point they lie. Building capability through systems and training: Here the organization may be wishing to

move towards offering solutions for its customer rather than a relatively narrow range of

well defined services. The mechanism for this is investing heavily in more powerful

information systems, while also expanding the role of the front office.

Building capability through incremental development: Here the organization may take what

appears to be a less risky approach to building capability. It effectively takes on activities or

client assignments that are outside normal sphere of action, but which it believes can be

fulfilled learning from experience

Moving to a commodity by constraining flexible resource: An example of this would be a

gourmet chef being asked to work in a fast food, menu-limited restaurant. Even though he

would make it, he would be over qualified, too expensive and unmotivated to continue what

seemed to be a repetitive and limited process. Moving in this direction would pose significant

challenges for management, employee morale and development.

Moving to a commodity investment process capability: Here the organization will have

identified market need for a high-volume version of an existing service or possibly an entire

new service. To get there the organization will invest in a similar way as in direction no.1.

Chapter 7

The pressure on service providers The organization is a source of pressure for service employees requiring them to deliver the

certain levels of quality and productivity. All service providers face two distinct but equally different pressures; from their managers (organizational pressure) and from their customers.

Organizational pressure: nature of the task; service design, processes and resources;

performance objectives and targets; reward and appraisal systems.

Customer pressures: Customer expectations, intensity of contact, mood and anxiety,

customer competence.

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Customers are a source of pressure for service providers: through unrealistic expectations, customer incompetency and anxiety.

These pressures may lead to issues of motivation, poor customer relationships, anxiety and stress. These pressures may lead to increased costs, poor industrial relationships, low morale and ill health. See picture 7.2 p. 241.

Managing and motivating service providers Clear leadership is essential for counteracting the pressures on service employees. These

approaches to managing and motivating service providers (a small selection): Providing inspirational leadership, clarifying the roles of service providers, using scripts

appropriately and involving employees in performance improvement.

Teams and team working can provide a powerful mechanism, both in reducing the pressure on single individuals and that complementary skills and experience exceed those of any individual.

Well designed service scripts serve a number of purposes in service design, enabling consistency and providing useful prompts for employees. In addition scripts may also provide a sense of security for customers and employees alike. A familiar script may also allow customers to relax because they understand the ‘rules’ by which the encounter will be played out. The downsides of scripts may be defensive behavior by the customer and inflexibility.

Good service is facilitated by reducing role conflict and ambiguity and increasing role clarity.

Defining the degree and type of discretion required for each role is essential and provides insights for the managers in dealing with operational transitions. It’s not desirable or possible to have scripts for every service situation, so most of service organizations give some degree of discretion to their service providers. It is often more helpful to give clear indications of the limits of an employee’s autonomy than have no guidelines at all.

Internal and external communication is a powerful element in building commitment from customers and employees. Many service providers don’t appreciate being kept in the dark about organization, its current activities and plans for the future; many service providers appreciate being involved and often make good contributions which can build their self-esteem and be an antidote to the pressure they experience. Communication is the key to success in this case.

Managing customers Like employees, customers are often service providers. Just like employees managers need

to understand how these ‘temporary employees’ should be managed so that they fulfill their required roles and display the desired behavior. Customers perform a variety of functions in the service delivery system and their role will depend on the nature of the activity and the approach determined by the service designer.

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The key roles taken by customers include Service provide: In many the customer provides themselves with a service, one obvious

example is task we fulfill in supermarkets, where we take items from the shelves, moving

them to the cashier and bagging them ourselves.

Service specifier: In most services the customer must provide clear information about

requirements before appropriate service product can be selected and delivered.

Quality inspector: Many service organizations will use the customer as a quality inspector.

Organizations may provide questionnaires or set up focus groups to find out the level of

customer satisfaction.

Trainer/role model: In some organizations customers are encouraged to help other

customers what to do and how to behave i.e. standing in an orderly queue.

The key issues in managing customer include defining: customer competence, customer selection, training, motivation and removal.

Chapter 8

Capacity management

It is essential to be able to define the capacity of each service process, identifying the

expected output for customers in the relevant period. Service capacity is defined as the

maximum level of value added activity over a period of time that the service can consistently

achieve under normal operating conditions. We can define and measure capacity relatively

easy at the process level.

Capacity is influenced by range of factors including product mix, location, intangibility and

resource constraints.

Most organizations adopt a mixture of capacity strategies. Level, chase and demand

management. The mixture should reflect the strategy of the operation.

The level capacity strategy: The prime objective of this strategy is to maximize utilization of

expensive fixed resources i.e. an airline is trying to planes as full as possible. To achieve this

there may have to be a number of tradeoffs, in the airline case overbooking.

The chase capacity strategy: This strategy is usually adopted by high-volume consumer

services, since a major aspect of their competitive strategy is the provision of ready and rapid

access to service. For these services, capital resource utilization is rarely a prime goal,

although cost reduction is very important.

Demand management strategies: Most companies operate a mixed approach to capacity

management. Whether adopting a principally chase or level strategy, most service

operations also operate some degree of demand management including: pricing strategies,

restricted service at peaks, specialist service channels, advertising and promotion.

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Operations planning and control Capacity must be allocated to specific tasks for specific customers, using appropriate rules or

algorithms. Most operations have rules or policies regarding the allocation of capacity.

Sometimes these rules are relatively informal, developed over time in such way that most

customers are satisfied. Other operations, usually those with more volume and/or

complexity tend to have more formal allocation systems.

Control systems range from expensive ERP (enterprise resource planning) systems to simple

appointment lists. The operations manager must chose the most appropriate mechanism.

Software based systems like the ERP, offer the capacity to integrate a number of functions

across the organization i.e. sales order-processing systems can provide direct input into

operational control, and then into suppler management systems. T the other extreme, many

control systems are basic but effective i.e.an appointment book at the car servicing

workshop, providing space for a given number of standard services and more complex jobs.

Capacity may be managed more effectively by ensuring that resources flow to meet the

schedule. The schedule is the operating plan that enables the various aspects of the

operation to be coordinated, a robust schedule should include: a clear customer flow;

ensuring supporting resources are available to meet the schedule; creating schedule for

interlinking activities and creating schedules for suppliers.

Managing bottlenecks and queues Key constraints (bottlenecks) define the capacity of the service process. It is critical to devote

management attention to these aspects of operations. All organizations need to understand

their key constraints. A clear understanding of these constraints or bottlenecks provides

greater clarity as to what is a realistic estimation of the capacity. Bottleneck management or

theory of constraint is relatively well known in the manufacturing industry. It is seen

important to manage the bottleneck- the stage in any process with the lowest throughput

rate and which therefore determines the effective capacity of the entire operation. In the

same way it is important for service operation managers to understand where the bottleneck

exists in the service process.

Queues are inevitable in service operations, developing “waiting time” strategies will reduce

potential customer dissatisfaction. Queues occur in most service activities, for any operation

using level capacity queues are designed into the system. Furthermore no capacity strategy is

perfect and queues are almost inevitable. The task for operations managers is to minimize

the impact of queuing on their customers. It has been shown dissatisfaction with the queuing

time also affects the service experience as a whole. (For the 10 principles of waiting time see

p.292)

Queuing theory and computer simulations also provide valuable means of understanding

complex queuing situations.

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Managing the coping zone It is important to develop actions to

avoid being in the coping zone too

much. This usually requires

organization-wide approaches. Almost

all service operations experience a

point where demand outstrips supply:

customers may perceive a fall in

quality, and staffs feel under increased

pressure. This is known as the coping

zone (figure 8.5).

In the cooping zone (this example is for a restaurant) when staff working at a high level of resource

utilization (between 80% and 100%) the effects may be:

Customers have to wait a long time for service.

There is increasing the probability of “stock-outs” (items removed from the menu).

Customers feel rushed and under pressure not to ask too much from busy serving staff.

Staffs feel under pressure and are less likely to give courteous responses or the personalized

service expected.

Low utilization may cause other effects and problems for both staff and customers such as:

If the restaurant feels “dead” may give a negative quality feeling among customers e.g. no

sound (buzz) of conversation in the surrounding area.

Service can be slow due to kitchen is not working efficiently enough and no dinners are ready

to be delivered by the servers.

In the same way can the serving staff be less attentive than expected due to they may not be

busy enough to be fully tuned in to customer needs.

How to manage the coping zone The seven steps to managing the coping zone:

1. Identify the service concept.

2. Determine how resources utilization is to be measured. For a high quality restaurant you

can count the number of chairs/tables utilized during the evening

3. Draw the outline profile. Example given in figure 8.5 may not represent all customers at all

times, same may like an empty restaurant but may give a good overall picture of the

customers. Therefore different profiles can be made at low/high utilization.

4. Understand the nature and impact of the coping zone. It is important to recognize the

signals that suggest this has been reached and be sensitive to them – Customers tempering is

flowing, customers are looking around or queues appearing etc.

5. Determine the “ideal” operating area. In figure 8.5 the coping breakpoint is identified at

80%, and after that no more customers can be seated. Than two approaches can be adopted:

Operate at 80% resource utilization. Operating at this point indicates that the

restaurant loses potential revenue. It is critical to determine and understand the

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difference in customer satisfaction at 80% and 100% and at what point the

customers won’t return.

Operate at 100% resource utilization. This is a short term cash-generating strategy

but can be appropriate e.g. for restaurants in holiday resorts which do not expect

high level of returning customers.

6. Understand why coping happens. Clearly it is impossible to maintain a utilization of 80% at

all times. For example an introduction of a new menu may gain an unexpected short-term

peak. A key point here is to know that peaks occur and be ready to deal with it. If no peaks

and no enters in the coping zone occurs the organization has too much resources.

7. Develop coping strategies. Many organization cope after fashion e.g. all diners are given

food but perhaps with varying service experience. Sometimes staff have their own way of

dealing with peaks, e.g. waiters who become overfly focused on one task, making it

impossible for customers to attract their attention to make yet more demands. Operation

managers develop coping strategies based on one or more of the following:

Give information to customers that alert them for possible difficulties.

Intentionally reducing the service on offer, perhaps using a limited menu at peaks.

Being clear to staff about what to prioritize, rather “must dos” than “nice to dos”.

Flexible resources e.g. bringing staff from lightly loaded areas to assist overloaded

staff or call in extra/part time staff etc.

Coping key questions

Key questions for managers to ask when dealing with coping:

What does the customer perceived quality/resource utilization profile look like for your

service?

How does this vary by service process and by customer group?

What measures or early warning tell you that you are about to enter the coping zone?

What suffers for customer when you enter coping zone?

What suffers for employees when you enter coping zone?

How can you manage the coping zone better to reduce the impact on customers and

employees?

How to avoid being in the coping zone too much

Improving resource utilization Yield management techniques enable services with perishable capacity (hotel rooms, airline

seats) to maximize revenues.

Building flexibility.

o There are four basic forms of operation flexibility:

New product flexibility, the requirement of the service operation to

introduce new services into an existing mix. How often, which part of the

organization might extra recourses etc.

Product mix flexibility. The ability of the operation to deliver more than one

service product.

Delivery flexibility. The capability of the operation to change the timing of the

activity.

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Volume flexibility. The ability of the organization to change its level of output

to cope with fluctuating demand.

o Managers must also consider

Range. How much flexibility is required?

Response. How quickly must the change be made?

Effectiveness across the range. Most processes have an optimal range.

Cost of providing flexibility. What is the premium resulting both from the

change in output level itself and in providing the capability in the first place?

o Example of approaches to building flexibility

Flexible employment contracts.

Overtime.

Short-term outsourcing

Menu-driven service (standardization).

Teamwork. Develop multifunctional teams makes the staff able to work with

several working tasks.

Reducing capacity leakage. Why managers finds fins that they don’t have as much capacity

as expected.

o Labour sickness and absenteeism. Long periods of overworking overtime etc. tend

to make the organization counterproductive.

o Labour underperformance. E.g. experienced staff leaves just at the point they are

becoming effective.

o Scheduling losses. Too much capacity compared to the low demand or vice versa.

o Cost of complexity. The more the organization deals with a broad range of services

the risk occurs that the staff has to deal with things beyond their regular working

tasks.

o Quality failures. The need of deal with quality failures is a loss of capacity.

Organizational support for resource utilization. How the managers could deal with and

understand resource utilization in the context of a changing world

o How is the service concept changing? To what extent do the managers have

“visibility” in the future strategic direction of/for the organization?

o How well are the internal interfaces managed? A key role for the operations

manager is to manage the internal relationships as well as customer satisfaction.

o How important is resource management in the culture of the company?

Chapter 11

The relationships between operational decisions and business performance Understanding the chains of cause and effect between operational drivers and business performance

helps managers make efficient and effective decisions. Leading edge organizations are leading

intuition-based management and try understanding the

links between their operational drivers and business

results.

There are several frameworks that help us understand the chains of cause and effect between

operational drivers and business performance to be able to get the right response from their limited

11.1

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resources. Several tools have been developed lately to give managers better understanding these

relationships:

The results determinants framework

The performance pyramid

Return of quality

The balanced business scorecard

The service profit chain

The value profit chain

The business excellence model

The service performance network Cause-effect thinking maintains direct and strong relationships between service delivery, employee

management, an organization’s financial performance and broader aspects of business performance.

Managers wants to know the relationship between these variables to get a greater confidence in

decision-making, by spending $X on making decision Y will give return of $Z.

The result network

The impact on service delivery on

financial and broader business

performance shows relationships

between a range of elements in

this network. Some of the

relationships between are shown

in figure 11.2.

Service delivery financial performance

A change in service delivery e.g. improved customer experience and/or outcome can represent a cost

for the organization and therefore give a negative impact on financial performance. Improving

processes, increasing staff, redesign jobs etc. are likely to incur cost. Operational managers needs to

understand balance between long-term and short-term financial benefit and also the wider scale

changes to the delivery system, which can have a great effect on the financial performance

Service delivery Customer satisfaction

Improved service delivery improves the perception of the service and increasing customer

satisfaction.

Customer satisfaction financial performance

Improving customer satisfaction can have direct impact financial performance. There are always

some customers willing to pay some more for superior service. Happy customers a more likely to

spend more money and customers are coming back again.

Customer satisfaction retention and loyalty

Existing customers that are very satisfied with provided service provided in comparison what they

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achieved before from a other supplier are more likely to repurchase and be more loyal (defensive

marketing). Clear differing relationships has been found between satisfaction and loyalty, these

varied from very low propensity to switch to an increasing tendency switch as seemed in figure 11.3.

Retention and loyalty financial performance

Loyal customers continue to purchase the service, generate long-term revenue streams, tend to buy

more, and may be willing to pay more. It has been shown that loyalty is a more important predictor

of profitability than market share. It cost less ion marketing to maintain existing customers than

attract new. Measuring loyalty and willingness to repurchase/recommend the organization´s service

should be a key measure of performance e.g. Net Promoter Scorex (NPS) (figure11.4).

Service delivery attraction

Organization’s may attract new customers with improved or superior and their ability to advertise

these improvements.

Attraction financial performance

Attracting new customers may gain increased revenues, increased market share, more profit on the

sold services.

Service delivery staff satisfaction

Employees that perceives that the service delivery is effective/improving staff may feel more

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satisfied with the organization which can lead to fewer: failures, problems, complaining customers

etc. Also the staff will feel less stressed and have more control over their work situation etc.

Customer satisfaction Staff satisfaction

This cause-effect is often called “satisfaction mirror”, greater staff satisfaction leads to greater

customer satisfaction.

Staff satisfaction retention and loyalty

Higher levels of staff satisfaction result in less stress, attrition and absenteeism and greater staff

loyalty and retention.

Staff satisfaction financial performance

Happier staff tend to be more productive, and staff satisfaction can and should have an impact on

financial performance, through reduce absenteeism and cost connected with this.

Staff satisfaction attraction

Positive word-by-mouth from staff about their organization and its services and successful

improvements of these may lead to attraction of new customers.

All these linkages doesn´t appear in every situation and organization but knowledge of their

existence and unrevealing of the linkages, managers can start to understand the direct impact of

their changes they make.

The drivers network

The key operational drivers are process, people, resources and network (figure 11.6) research has

shown significant relationship between all the main variables in the network particularly high

between leadership, vision and culture with management practices that are correlated with staff

satisfaction, customer satisfaction and profit.

Key stages in developing a network The key stages in developing a network are: create a model by capturing several threads through the

network, collect data and analyze the data to understand the relationships between the variables. At

a simple level there are three main stages:

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Create a network: This is the first step is to identify the key drivers and results and create a

service performance network linking the drivers to the results.

Identify the measures: Than identify the measures, existing or required, for each element or

variable in the network.

Explore the linkages: Simple regression analysis and graphical representations are good

enough to permit a basic understanding between the linkages in the model

World class service World class service organizations have superior business performance and understand relationships

between their operations decisions and business performance. These behaviors are the

characteristics of world class organization at a corporate and operational level.

The characteristics of world class organizations at a corporate level include:

Great leadership

Clear vision

Clarity of concept

Supportive culture

A well-developed strategy

The characteristics of world class service at an operations level include:

Willingness to listen to customers

Continuous improvement

Consistency of service

Responsiveness

“can do attitude”

Big and little thinking

Supportive and committed staff

Excellent performance management

Lack of complacency

Award for excellence Quality awards are usually based on a cause-effect model showing some of the key linkages between

operations decisions and their business performance, figure below shows the European Foundation

for Quality management (EFQM), but there are other models such as Malcom Baldrige Quality Award

(Figure 11.2).

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The various award schemes usually require the participating organizations to provide evidence of a

structured and sustainable approach to improvement. In these are often customer satisfaction, staff

satisfaction, strategy, management policies etc.

Chapter 12

Approaches to operational improvement Approaches such as total quality management, kaizen and benchmarking are more suited to short-

term, continuous change, while business process re-engineering, six sigma and lean thinking may

result in longer term, major change.

Continuous incremental and radical change strategies

The difference between continuous improvement (kaizen) and radical change (step change) is

explained in figure 12.1.

Total quality management (TQM)

TQM is one of the best approaches to continuous improvement (further reading in chapter 6-9 and

14), and the foundation of TQM is customer focus (meeting customers’ expectations) and total

involvement (continuous improvement). TQM has also three cornerstones: people, systems and

culture.

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Six Sigma

Six Sigma is more or less a set of tools and techniques for understanding and improving processes

and one of the most know technique is the DMAIC (define measure analyze improve and control).

Business process re-engineering (BPR)

BPR is a radical approach to improvement and change and the main principles of BPR are:

A cross functional approach: cross functional teams is appropriate for radical changes.

Out-of-the-box thinking: challenge traditional views and start with a “blank sheet”.

Simplification: BPR attempts to discard wasteful activities and focuses on simplicity and

logical ordering.

The negative side of BPR is that it is a risky activity because current processes are rejected and also

because of the high capital costs needed and support from and on IT.

Lean thinking

The basis of lean thinking is to clarify what adds value for the customer and/or organization and

remove all not value adding activities and gaining cost reductions and higher customer satisfaction.

Lean six sigma

Work with lean and Six Sigma together to reduce waste and variation.

Benchmarking and improvement

Further explanation in chapter 10

Service recovery Service recovery can be defined as “the action of seeking out and dealing with failures in the delivery

of service in order to improve delivery performance”.

Service recovery should lead to increased customer satisfaction, customer retention, process

improvements and improved financial performance.

Service recovery ingredients

Service recovery does not only deal with customers that have experienced a failure, a service

recovery must do more than that, and therefore it has three essential ingredients:

1. Designing out failures - prevent failures to happen in the first place.

2. Excellent complaint handling:

o dealing with customers

Acknowledgement

Empathy

Apology

Own the problem

Involve management

o Solving the problem for the customer

Fix the problem for the customer

Provide

o Dealing with the problem within the organization

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Find the root cause

Solve the problem

Provide assurance

3. Proactive service recovery –seeking out problems and potential problems. Most customers

do not complain, they rather tell others about the poor service than the organization´s staff.

Therefore, for example, to encourage feedback from customers the organization must make

it easy for the customer to leave feedback and deal with the root causes for the upcoming

problems. Example of methods that encourage feedback:

o Comment cards

o Notices

o Websites

o Staff feedback

To prevent that issues will become failures, the frontline staff has an essential role to play not only in

complaint management but also detect something before it goes wrong or before dissatisfaction

escalades. T o get the employees observant to customers can they.

Be sensitive to customers body language, mood, looks, expressions

Look for potential fail-points and deal with them

Check if everything is OK and mean it

Catch problems early, when they are just bleats, to prevent escalation

Take action in response to failures, not just complaints

Service guarantees A service guarantee is a promise to compensate a customer for a failing service and a guarantee

require an organization to formalize the service recovery process. A service guarantee should include

answers to the “the four acid tests” (of service recovery):

1. Does it lead to increased customer satisfaction?

2. Does it improve retention rates?

3. Does it drive process improvements?

4. And, as a result of these. Does it improve financial performance?

Downsides of guarantees

They imply that the service may well fall and a concern from organization that the customer may

cheat, but research made, shows that organizations that provides full money-back guarantees will be

abused no more than smaller payouts. This research material also showed that guaranties are

appropriate for repeating customers because they tend to not cheat.

Design of the promise

There are three key aspects when making a guarantee:

1. Design of the promise

Meaningful

Easy to understand

Explicit

Unconditional

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The payout

2. Design of the procedure. The system should be easy, nonthreatening, clear and known

3. Improving systems and procedures. When designing a guarantee one critical aspect is often

missed – That the guarantee should help to drive improvement through the organization and

provide the organization with about failures and encouraging improvements.

Chaper 14 – Service Operations Management -”Organizational Culture”

Introduction It is tempting to see organizational culture as some sort of “magic dust” that may or may not exist

but which somehow makes the difference between success and failure. It is useful to reflect on the

reason why some service organizations have been more successful than their competitors despite

having similar technologies, processes and skills.

Organizational culture - Definition: “The basic pattern of shared assumptions, values and beliefs

considered to be the correct way of thinking about and acting on problems and opportunities facing

the organization.”

Understanding organizational culture There are two schools of thought on organizational culture, The first proposes that cultures is

something tangible, almost to the point where it can be written down in much the same way that an

organization chart can be included in the company’s operation manual.The opposing view is that

culture is much less tangible, and only exist when people in the organization talk to each other and,

by their words and behaviors, act out the culture of the organization.

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Schein’s model of organizational culture

ARTEFACTS - Visible organizational structures and processes (hard to decipher)

These are the visible aspects of the organization – its structure and

processes, and other physical evidence that can be observed or

felt.[Celebrations of success, measurement and control system] Although

these artefaces may be observed, it is very often not clear ehat they really

mean for the organization, though they might give some clues.

ESPOUSED VALUES - Strategies, goals and philosophies (espoused

justifications)

This culture operates at the cognitive level. It describes the stated strategies and beliefs of the

organization. Thus this level may include aspects of the company’s mission statement – the general

strategy as declared and set down by the leadership team – and statements as to the general values

or guiding principles of the organization

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BASIC UNDERLAYING ASSUMPTIONS - Unconscious, taken-for-granted beliefs, perceptions, thoughts

and feelings (ultimate source of values and action)

The third category of values to be identified are those that the organization is less happy to publish

to the outside world, and frequently prefers to ignore internally. These values are those aspects of

the organization that we are not proud of, but nonetheless are part of our culture.

It is important to realize that organizational culture is only really understood when the “unconscious”

part of the organization’s personality is revealed. One of the most powerful ways of uncovering the

key elements of the culture is to provide a framework for members of the organization to discuss

these aspects of their word and to begin to understand the various impacts on their behavior and

therefore, eventually on the service they may provide to customers.

THE CULTURAL WEB The cultural web is a useful way of understanding

organizational culture and can also be used to help

managers understand how the can influence culture.

The Paradigm – “The way that we view the world”, The sets

of values principles and possibly prejudices that inform our

judgments. An organization’s paradigm may have a

number of facets:

A description of the sector of which the organization is a part, hotels, computer service of financial services.

The principal costumer segments that it seeks to serve: Global organinizations, small businesses or individual customers.

In some cases the organization may express what it does in terms of what the customers are buying rather than what the organization is providing. E.g. theme park:” we provide magical experience” rather than “selling rides”.

The paradigm may contain some beliefs about what the organization thinks is good about itself, such as being a risk-taker, innovative, or response to customer.

It contain some aspects of the way people think about the organization that are less positive: is ruthless, risk averse or arrogant.

It is important to identify aspects of the paradigm that are helpful for service delivery as well as those

which hinder. Organizations that believe that long-term customer satisfaction is more important than

short-term profit will generally find a supportive environment for service deliver.

Organizational structure – This aspect deals with the organization’s structure as it works, at least on

paper. It is the structure that may be published in the form of organizational charts, showing who

reports to whom. Some of the dimensions od organizational culture.

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Is the structure hierarchical or flat?

Is it organized geographically or by product area?

Is it function or process-driven?

Is it bureaucratic or flexible?

Is it based on teams or individuals? The form of organization will determine to a large extent how responsive to customer it will be. For

customer-facing activities it is helpful if the unit serving the customers is virtually autonomous, and

able to satisfy most customers requests from it own resources. This may be seen as rather inefficient,

and the management may prefere to centralize many activities in order to reduce costs.

Power structure – This aspect or organizaton’s culture is particulary important when it comes to

changing the way things are done. Power structures may have nothing to do with the way the

organization chart is drawn. Some individuals appear to have far more power than their status would

suggest, either because of the force of their personality or because they exert some power based on

expertise.

Control system – are the guiding infrastructure of the organization. For some organizations,

everything must follow well-defined company procedures which may deliver consistent results but

leave little room for flexibility. Performance measurement is at the hart of most control system.

“What gets measured gets managed, but what gets rewarded gets done”.

Routines and rituals – These are the activities that are not necessarily in the company procedure

manual but nevertheless have special significance for the organization. They might range from

informal system, such as ways of getting round bureaucratic or inflexible procedures, through to

celebrations of success, such as pub nights or parties (or “thank you” card if someone done well).

Symbols – The physical evidence of who or what is important in the culture. A couple of decades ago

it was relatively easy to see who was important in a large organization because the managers’ status

was linked to which floor their office was on, with directors at the top and junior staff at the bottom.

Today with a move towards flatter organizations and a reduction in overt differences management

and staff, the organizational status symbol have become more subtle.

Stories - The final aspect of the cultural web is the stories that circulate in the organization. These are

sometimes called the “war stories” and are generally told to new starters early in their stay in an

organization. These stories can be both positive and negative.

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USING THE CULTURAL WEB A typical process for developing this analysis is as follows:

Develop a common understanding of the key elements of current culture, possibly through the use of facilitated focus groups.

Examine the current paradigm and decide what aspects would be desirable to change to fit the future strategic direction.

Identify mismatches between the desire paradigm and current elements of the cultural web.

Develop action plans to influence or change where possible.

Mangers may feel that there is little they can do to change the organization’s culture. Certainly, to

make a major shift in culture is not something that can be accomplished by one individual overnight.

However, most managers are part of the power structure, and are able to influence their areas of

operation. The value of cultural web analysis is that it is possible to identify means of changing

aspects of the culture. E.g. new reward systems change the emphasis of the control system relatively

quickly. Likewise, it is easy to develop new stories, or to at least ensure that the positive stories are

communicated effectively.

Types of culture It is important to know the differences between cultures, recognizing too that different cultural

environment exist within the same organization. The culture of the boardroom will be rather

different from that in that call center. There are a number of factors that influences this diversity,

which include individual personalities, the nature of the role undertaken, and the extent to which

people have direct customer contact.

Culture can be characterized as Greek gods:

Zeus – the club culture/ power culture. Excellent for speed of decision-making, where key people are

chosen because they think and act like the leaders. Can be very effective, but very bad if the leader

abuses his power. + Responsive to customers.

Apollo – the role culture. Based on rules on order. It is stable and predictable, excellent when the

market is not changing rapidly. + Extremely consistent.

Athena – the task culture. A problem solver. Basis of this culture is expertise, not experience, age or

position. (This culture works well when the product of the organization is the solution to a problem).

Expansive culture, because it is based on experts and the outcomes are not predictable, often

requiring development time and resource.+ Flexible.

Dionysus – the existential culture. Here the emphasis is that the individual is in charge of their own

destiny. In the other 3 cultures the individual is there to help the organization achiving its purpose,

but in this culture the organization exists to help the individual. + Nightmare when it comes to

service delivery.

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Finally, an important point to note is that an understanding of the difference in organizational culture

is particularly relevant in a business-to-business relationship.

National cultures

National cultures can be characterized along 4 dimensions:

Power-distance. Here employees are relatively passive and are used to be directed. Asian org.

cultures typically have high power-distance ratings. Low power-distance rankings on the other hand

encourage underlying groups to be involved in decision-making.

Uncertainty avoidance. This dimension evaluets the extent to which the culture encourages risk-

taking

Individualism-collectivism. UK, USA and Canada places high regard on the achievements of

individuals, whereas some cultures value loyalty to extended family or tribe more highly.

Masculinity-femininity. Masculinity-dominant cultures place emphasis on acquisition of money,

material possessions and on ambition. Managers are encourage to press for ever-increasing goals

and objectives. Femininity – the emphasis is on creating a more collaborative environment.

Global businesses must understand potential conflicts between organizational values and cultural

norms.

The management of change and service delivery

– Strategies for cultural change

Progressive. Also called aggressive approach. Used when there is no time for consultants help.

Managers have to implement change rapidly. Progressive approach is effective for major change,

bur it poor gaining commitment and ownership of the result.

Consultative. Characterized by a great deal of communication and involvement. Poor in

implementing radical solutions, but excellent in gaining commitment.

Educative. The organization provides material and training to explain why the change is necessary.

This approach is based on the view that if people understand the need for change, they will be

happy to support it, i.e. no anxiety. Time taking.

Corresive. Similar to organizations grapevine = Ryktesspridning. Senior management let loose to key

message at key points throughout the organization. Sometimes necessary for commitment of

groups of professional, who often resists direct control.

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Most change processes will contain parts from all four approaches.

Five parameters for successful change process: Expressiveness – The extent to which the change process communicates a new idea.

Commonality – Culture is produced when people speak to each other. The extent to which everyone

speaks the same language and means the same thing.

Penetration – To what extent has the change really “got inside” the organization.

Adaptability - Is the change process able to handle diversity of situations represented in a complex

organization (different apartments adapt in different ways).

Durability – Is it clear that the change will not go away.

Pitfalls to avoid The problems of change management:

• Not establish a sense of urgency. 75 % of managers must accept the need for a major change and

immediate change if it is to be successful.

• Not creating a powerful guiding coalition. For service organizations its vital to gaining the

commitment of customer-facing staff as well as senior management.

• Lacking a vision. Many organizations implement initiative after initiative without a clear sense of

how it fits together.

• Undercommunicating. Employees usually trust their closest manager or team leader more than the

senior management team, which is often remote and seen as pursue its own agenda. The first-line

supervisor or team leader is therefore central to the implementation of a new service vision.

• Not removing obstacles to the vision. It is necessary to ensure that job roles and measurement

system are consistent with the change required, rather than hope thet they will catch up. Any

significant change will meet obvious and nonobvious resistance, which must be faced.

• Not planning for short-term wins. Staff need real evidence of some success within 12 to 24

months.

• Declaring victory too soon. It is tempting to slacken off the pressure at the first signs of success.

• Not anchoring the change in the organization’s culture. Managers need to understand the

motivators for their staff. Have they changed in line thit the new requirements?

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Capacity for change

Many change initiatives fail because they are under-resoursed. This is a concept that should be

understood by operations managers. Change fails because managers do not have the capabilities to

manage it. If this is so, the organization must recruit or buy this ability.

The transition curve shows the individual’s response to a proposed change. The individual is initially

shocked and fairly quick moves to the denial state, which can be either pretending that the change

will go away, or that they can deal with whatever comes their way. This state leads to downward

spiral into realiry as they recognize that the new environment will require the acquisition of new

skills and new ways of working. Having reached this low point, the individual needs, often by trial

and error, to begin to integrate new approaches into their way of working. At each stage of the

transition curve managers must respond appropriately. The transition curve is generally estimated

to require a period of two years to elapse from beginning to end.

Shock – In the earlier stage, when the

employees are in shock, it is important to

answer questions honestly as possible,

recognizing that since the detail has yet to be

worked through it is unlikely that definitive

answers can be given. Time taking.

Denial – (rejection) In the denial stage it is important to continue to reinforce the fact that the

change will take place – to reiterate the business or market reasons for the change. It is also

important to be careful about how “past” is described, There is often a temptation to oversell the

future in an effort to gain commitment to the proposed change.

Reality – There comes a point when it becomes apparent the the change is going to happen. People

may be moved to new roles, new organizational structures are put in place, and some people may

leave the organization.

Integration – The change has become part of the organization at this point. It is easier to go forward

rather than go back, but the manager must be careful not to relax too soon. Operations managers

must work through the detail of the organization’s culture, such as reward and recognition schemes,

promotion criteria and informal routines, to ensure thet the described behaviors are encouraged.