MKT3125: Services Marketing Management Lecture 9 Managing Service People

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Objectives Discuss the importance of leadership and motivation of service employees in delivering excellent operations performance Describe the pressures on service providers Describe a number of means by which operations managers can manage and motivate their staff Describe how customer can be managed to fulfil their roles and display the ‘right’ behaviour

The pressures on service providers The organization is a source of pressure for service employees; requiring them to deliver to certain levels of quality and productivity. Customers are a source of potential pressure for all service providers: through unrealistic expectations, customer incompetence and anxiety. These pressures may lead to issues of motivation, poor customer relationships, anxiety and stress.

Pressures on service providers Organisational pressures Nature of the task Service design, processes and resources Performance objectives and targets Reward and appraisal systems Service providers Customer pressures Customer expectations Intensity of contact Mood and anxiety Customer competence Johnston & Clark, Service Operations Management, © Pearson Education Limited

The many roles of the service provider Order Taker Advice giver Image maker Service deliverer Complaint handler Therapist Trainer Coach Image Source: https://www.dzs.com/multi-tasking-hot-topics/

Pressures on service providers: issues and outcomes Organisational pressures Nature of the task Service design, processes and resources Performance objectives and targets Reward and appraisal systems Service providers Customer pressures Customer expectations Intensity of contact Mood and anxiety Customer competence Potential outcomes Increased costs Poor industrial relationships Low morale Ill health Psychological damage Learned helplessness Poor service Issues Motivation Role clarity and fit Relationships Risk Stress Johnston & Clark, Service Operations Management © Pearson Education Limited

Pressures on service providers: providing protection Managing providers Providing inspirational leadership Harnessing the power of teams and teamwork across the organisation Clarifying the roles of service providers The appropriate use of scripts Defining and enabling appropriate levels of employee discretion Establishing effective communication to employees Involving employees in performance improvement Encouraging service employees to ‘own’ processes and customers Organisational pressures Nature of the task Service design, processes and resources Performance objectives and targets Reward and appraisal systems Potential results Inspired and involved employees Responsive and responsible employees Process and customer ownership Employee commitment and retention Enjoyable work Effective and efficient delivery systems Business improvement Service providers Customer pressures Customer expectations Intensity of contact Mood and anxiety Customer competence Johnston & Clark, Service Operations Management © Pearson Education Limited

Providing inspirational leadership: Bennis’ 4 Competencies of Great Leaders The management of attention – to capture the hearts and mind of people through communicating a focus on commitment and a compelling vision The management of meaning – importance of bringing substance to the vision to make it clear to those following The management of trust – leader’s reliability, give a level of security to followers, a line of action with words The management of self – knowing own strength and weakness, not defeated by mistakes or problems nor starts blaming staff

Harnessing the power of teams and teamwork across the organisation Facilitating complimentary skills and experience of a team exceeds that of any individual. When teams work together to develop clear goals, improve the process, improve communication; this helps in responding to customers Teams can overcome significant challenges, build trust in one another and in each other’s capabilities which then contributes to a more effective delivery system Teams working closely and collaboratively enjoy their work and have more fun than others. Image Source: https://www.claynelsonlifebalance.com/webinars/

Clarifying the roles of service providers The following should be minimized Role conflict: when there are many responsibilities to be carried out at the same time, happens when the basic service design is in error, or if there is a conflict between the demands of a job and the individual’s own view of it (Call center agent) Role ambiguity: When the person is unsure of the requirements of the role, lack of clarity Image Source: http://www.bpmleader.com/2013/04/09/human-resources-%E2%80%93-role-conflict/

The appropriate use of scripts To assist the service employee to find out what the customer wants or needs. To control the customer To establish historical routines that may be relevant to the service encounter To facilitate control of workers To legitimatize organizational actions To serve as analogies To facilitate organized behavior To provide a guide to behavior To buffer or exacerbate role conflict To provide a basis for evaluating behavior. To conserve cognitive capacity Image Source: http://clubpenguin.wikia.com/wiki/File:Stage_Script_icon.png

The challenges in the use of scripts They maybe too inflexible They may lead to customer perception of robot-like behavior. They may lead to defensive behavior

Employee discretion Adapted from Kelly (1993) Perceived individual employee discretion Low High Organisation style Rigid (imposed) Fluid (empowered) Leadership style Facilitating Directive Type of employee discretion Creative Routine COMPLIANT ADAPTIVE Johnston & Clark, Service Operations Management © Pearson Education Limited

3 Types of Employee Discretion (Kelley) Routine discretion – employee has discretion regarding HOW the task is performed (ex. Investment advisor) Creative discretion – exercised by those who develop both WHAT and HOW they do things (ex. Creative team in new product development) Deviant discretion – takes action generally not approved by the organisation (ex. Retail staff giving refund to customer against policy)

Key dimensions of employee discretion cont’d. Organisational Style (Fluid or Rigid) - Fluid organisations change their structure/process relatively frequently (e.g. consultancies, project-based orgs.). Needs to adapt processes to ‘fluid’ situations. Rigid organisations have clear operating procedures that requiring compliance (ex. Retailers, Insurance companies) Perceived Individual Employee Discretion – the degree to which the employee ‘feels’ of the amount of discretion they have or are capable of.

Key dimensions of employee discretion cont’d. The Compliant Organisation – frequently found in high-volume, low-variety matrix (Commodity) Focus is on consistent delivery across multiple locations with many servers Well developed process documentation, with training of employees on how to behave in each situation High volumes and consistent processes lead to automation and/or low cost of labour Performance measure relates to short-term (e.g. response time, orders taken)

Key dimensions of employee discretion cont’d. The Adaptive Organisation – frequently found in high-variety, low-volume matrix (Capability) Ex. Management consultants, legal advisors High degree of creative discretion Dependence of key skill/s and knowledge of individual Resistance to generating standard processes Emphasis on innovation R&D are focused on professional development of people Management style is facilitative Performance measures are like more long-term

Employee discretion: Managing Transitions Perceived individual employee discretion Low High Organisation style Rigid (imposed) Fluid (empowered) COMPLIANT ADAPTIVE Leadership style Facilitating Directive Type of employee discretion Creative Routine ANXIOUS ZONE FRUSTRATED ZONE Johnston & Clark, Service Operations Management © Pearson Education Limited

Source: Bowen and Lawler Employee involvement Control concentrates 4 key features at top of organization. Involvement pushes them down: Information about operating results and measures of competitive performance Rewards based on organizational performance (e.g. profit sharing, stock ownership) Knowledge enabling employees to understand and contribute to organizational performance Power to influence work procedures and organizational direction (e.g. quality circles) Source: Bowen and Lawler 139

Employee involvement High involvement Suggestion involvement employee recommendations Job involvement jobs redesigned employees retrained supervisors facilitate High involvement information is shared employees skilled in teamwork, problem solving etc participate in decisions profit sharing, stock ownership 140

Empowerment Climate Competence Commitment organisational style and culture resources opportunity Climate capabilities employee development matching employee and job Competence rewards and recognition achievement orientation corporate consciousness Commitment

Factors Favoring Empowerment Firm’s strategy is based on competitive differentiation and on personalized, customized service Emphasis on long relationships vs. one-time transactions Use of complex and non-routine technologies Environment is unpredictable, contains surprises Managers are comfortable letting employees work independently for benefit of firm and customers Employees seek to deepen skills, like working with others, and are good at group processes 141

Cycle of Success Employee cycle Customer cycle Low customer turnover loyalty Continuity in relationship with High customer satisfaction Extensive training Employee satisfaction, positive service attitude Repeat emphasis on customer loyalty and retention Higher profit margins Broadened job designs Lowered turnover, high service quality Above average wages Intensified selection effort Train, empower frontline personnel to control quality (Schlesinger and Heskett, 1991, cited in Lovelock and Wirtz, 2011, p.312) Employee cycle 144

Cycle of Failure Employee cycle Customer cycle High customer turnover Failure to develop customer loyalty No continuity in relationship for Customer dissatisfaction Employees can’t respond to customer problems Employees become bored Employee dissatisfaction; poor service attitude Repeat emphasis on attracting new customers Low profit margins Narrow design of jobs to accommodate low skill level Use of technology to control quality High employee turnover; poor service quality Payment of low wages Minimization of selection effort Minimization of training Emphasis on rules rather than service (Schlesinger and Heskett, 1991, cited in Lovelock and Wirtz, 2011, p.309) Customer cycle Employee cycle Employee Cycle of Failure – starts with narrow design of jobs, to employ only low skill levels, rules rather than service is emphasized, use of technology to control quality Customer Cycle of failure – starts with organisation emphasis on attracting new customers, who then become quickly dissatisfied with employee performance and high attrition leads to lesser customer loyalty, high customer attrition as well 142

Cycle of Mediocrity Customers trade horror stories Good wages/benefits high job security Other suppliers (if any) seen as equally poor Customers trade horror stories Service not focused on customers’ needs Employees spend working life in environment of mediocrity Narrow design of jobs Success = not making mistakes Complaints met by indifference or hostility Employee dissatisfaction (but can’t easily quit) Emphasis on rules vs. pleasing customers Promotion and pay increases based on longevity, lack of mistakes Initiative is discouraged Jobs are boring and repetitive; employees unresponsive Resentment at inflexibility and lack of employee initiative; complaints to employees No incentive for cooperative relationship to obtain better service Training emphasizes learning rules Customer dissatisfaction Example. Monopolies, industrial cartels, regulated oligopolies (Schlesinger and Heskett, 1991, cited in Lovelock and Wirtz, 2011, p.311) 143

The Service Talent Cycle (Lovelock and Wirtz, 2011, p.313) 27

Managing the workforce MATCH THE WORKER AND THE JOB DEFINE RESPONSIBILITIES SET STANDARDS OF PERFORMANCE COMMUNICATE & INVOLVE TRAIN ENSURE GOOD SUPERVISION REWARD PERFORMANCE Source: Schroeder, 1989

Managing Customers Like Employees, customers are often service providers: - Service provider (e.g. supermarket shopping, buffet) - Service specifier (e.g. clinics, salon) - Quality inspector (e.g. focus groups, feedback forms) - Trainer/role model (e.g. queueing in an orderly fashion, talking to other customers who may be new to the service)

Benefits of Customer Involvement Inclusion: resulting in an increased sense of loyalty Resource Productivity: If customer is carrying out some of the tasks less resources are required Customer Control: they may feel they have more control on what happens to them

Customer management issues Defining customer competence Customer selection Customer training Customer motivation (some incentives or penalties for customers) Customer removal

Service Profit Chain (Heskett et al., 1994) Workplace Design Profitability Revenue Growth Employee Productivity Retention External Service Value Internal Service Quality Employee Satisfaction Customer Satisfaction Customer Loyalty Workplace Design Job Design Employee Selection & Development Employee Rewards & Recognition Tools for Serving Customers Service Concept Service designed & delivered to meet customers’ needs Retention Referral Repeat Business (Heskett et al., 1994)

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