The Service Encounter

Learning Objectives Use the service encounter triad to describe a service firm’s delivery process. Discuss the role of organizational control systems for employee empowerment. Prepare abstract questions and write situational vignettes. Discuss the role of customer as coproducer. Describe how elements of the service profit chain lead to revenue growth and profitability.

The Service Encounter Triad Organization Efficiency versus autonomy Efficiency versus satisfaction Contact Personnel Customer Perceived control

Definitions of Culture Schwartz and Davis (1981) - Culture is a pattern of beliefs and expectations shared by the organization’s members. Mintzberg (1989) - Culture is the traditions and beliefs of an organization that distinguish it from others. Hoy and Miskel (1991) - Culture is shared orientations that hold the unit together and give a distinctive identity.

Organization Culture A system of shared beliefs supports organizational flexibility in meeting the challenges of managing projects in globalized competitive environments

Organization Culture A system of shared beliefs supports organizational flexibility in meeting the challenges of managing projects in globalized competitive environments

Photo by Vermin Inc , CC @ Flickr http://www.flickr.com/photos/vermininc/2335148856/in/photostream/ Multicultural clientele Cultural differences and gaining trust among team members are major hurdles to overcome

The Service Organization Culture ServiceMaster (Service to the Master) Disney (Choice of language)

The Service Organization Empowerment Invest in people Use IT to enable personnel Recruitment and training critical Pay for performance

Who was the (business) ‘superstar’ in Tom Peters’ best seller “Thriving on Chaos”?

NO!

WHO? – It was Paolo Azuela If you think it was a Fortune 100 CEO, you are very wrong! – It was Paolo Azuela WHO?

Who?

It was Mr. Paolo Azuela, a housekeeper at the Ritz Carlton Hotel in San Francisco. May I ask you how much money can you spend right away without filling in any paper, get any additional signature?

Mr. Azuela. And the bellboy who picks up your bags Mr. Azuela .. And the bellboy who picks up your bags.. And the doorman who hails you a cab… are authorized, on the spot – no signature from above – to spend up to $2000 to fix any customer problem. There are many people with exalted titles who cannot spend $2000 without six signatures! What's the point: with that big grant of spending authority, the Ritz-Charlton has turned MR Azuela into the de facto Chief Operating Officer, Entrepreneur-in-Chief of his floor in the hotel. He ‘owns’ that floor (Azuela, Inc.. A wholly owned subsidiary of the Ritz San Francisco). He is not a ‘h o u s e k e e p e r’ he is a no-baloney business person. By the way in the case of the Ritz, business units of one definitely work. The company is one of the rare service firms to win a Malcom Baldrige National Award.

Organizational Control

Contact Personnel Selection 1. Abstract Questioning 2. Situational Vignette 3. Role Playing Training Unrealistic customer expectations Unexpected service failure

Difficult Interactions with Customers Unrealistic customer expectations Unexpected service failure 1. Unreasonable demands 1. Unavailable service 2. Demands against policies 2. Slow performance 3. Unacceptable treatment of 3. Unacceptable service employees 4. Drunkenness 5. Breaking of societal norms 6. Special-needs customers Use scripts to train for proper response

The Customer Expectations and Attitudes Economizing customer Ethical customer Personalizing customer Convenience customer Customer as Co-Producer

Service Encounter Success Factors

Employee Perceptions of Customer Service at a Branch Bank Outstanding Terrible Terrible Outstanding

Satisfaction Mirror Higher Customer Satisfaction Higher Employee        More Familiarity with Customer Needs and Ways of Meeting Them Greater Opportunity for Recovery from Errors Higher Employee Satisfaction Higher Productivity Improved Quality of Service More Repeat Purchases Stronger Tendency to Complain about Service Errors Lower Costs Better Results Higher Customer Satisfaction

Cycle of Capability Is attitude emphasized? Are job previews utilized? Are customers screened? Are employees encouraged to refer friends?   Are referrals from the “best” employees given priority? Careful Employee and Customer Selection   (and Self-selection)) Is training for job and life?   Is it an important element of quality of work life? Employee Referrals of Potential Job Candidates High-Quality Training Is satisfaction measured periodically?   Are measurements linked to other functions on the cycle? Do they reflect needs of the service encounter? Are they designed to foster relationships? Well-Designed Support Systems Information Facilities Cycle of Capability Satisfied Employees Appropriate Rewards and Frequent Recognition Greater Latitude to Meet Customer’s Needs Does it reflect top management “talk”?   Is it enough to allow delivery of results to customers? Are they linked to service objectives?   Are they balanced between monetary and non-monetary? Clear Limits on, and Expectations of, Employees Do they limit the “right” risks? Are they logical to employees?  

Service Profit Chain Internal External Customers Employees Operating strategy and service delivery system   Service concept Target market Loyalty Customers Revenue growth   Satisfaction Productivity & Output quality Service value Employees Satisfaction Loyalty Capability Profitability Service quality Customer orientation/quality emphasis Allow decision-making latitude Selection and development Rewards and recognition Information and communication Provide support systems Foster teamwork Quality & productivity improvements yield higher service quality and lower cost Attractive Value  Service designed & delivered to meet targeted customers’ needs Solicit customer feedback Lifetime value Retention Repeat Business Referrals

Topics for Discussion How does the historical image of service as servitude affect today’s customer expectations and service employee behavior? What are the organizational and marketing implications of considering a customer as a “partial employee”? Comment on the different dynamics of one-on-one service and group service. How does use of a “service script” relate to service quality? If the roles played by customers are determined by cultural norms, how can services be exported?

Situational Vignette A particular customer has the irritating habit of always showing up about two minutes before closing and staying late. Often this occurs on the night when weekly store meeting are held after closing time. This delays starting the meeting and furthermore employees are on the clock waiting for the customer to leave. What would you do?

Situational Vignette As a new employee at a busy store, you have been routinely performing clean-up tasks (garbage removal and restroom cleaning). Company policy dictates that these are tasks to be shared. It has become clear that two employees consistently avoid these jobs in favor of more pleasant duties. How would you handle this situation?