1 Middle East Performance Measurement & Benchmarking Conference Challenges of Measurements in Service Industry 21 st to 22 nd June 2004, Dubai Sunil Thawani Manager – TQM Department Union National Bank, Abu Dhabi

2 Purpose of Presentation Concepts and unique features of Service Quality; Service Quality model; Causes of service quality problems; Challenges of measurement in Service Quality; Establishing service quality performance standards and Benchmarking.

3 Service Industries Retailing; Distribution; Financial services – banking, insurance; Hotels and tourism; Leisure, recreation, entertainment; Professional and business services like accountancy, marketing, law, consulting; Healthcare; Software etc.

4 Services growth Goods growth GDP growth

5 Share of commercial services and goods in world trade, Services 19% 81% Goods 6

6 Service Industry - Facts Service industries generate over 2/3 rd of GNP and employment in developed countries - ISSN Journal Volume 22, 2004 ) 9 out of 10 jobs are created by Services economy – “Delivering Service Quality” by Valerie, Parsuraman and Leonard”; Of the top 100 revenue earners worldwide, 55% are service firms – Top service firm in revenue worldwide – Wal-Mart is a service firm; Service firms produced 45% more revenue per employee than manufacturing firms;

7 Service Quality

8 What Makes Service Quality Unique 1. Service is intangible - it cannot be easily measured, tested and verified in advance of sales to assure quality; 2. Services are perishable; 3. Precise standards like manufacturing can rarely be set; 4. It is created and consumed simultaneously or near simultaneously; Service Production and Consumption are often inseparable i.e. Customer is in service factory.

9 What Makes Service Quality Unique 6. Services offered can vary from “Producer to Producer” e.g. outlet to outlet; 7. Outcome of Service is as important as process of delivery; assessment of quality is made during the service delivery process. 8. Service Quality is more difficult for customer, to evaluate, than product quality; 9. Customer cannot retain the actual service. The effect of the service can be retained.

10 Service Quality Model

11 “Delivering Service Quality” by Valerie, Parsuraman and Leonard”

12 Service Quality Gap The gap between expected and perceived service is a measure of service quality Expectation > Service perceived = Exceptional Quality, Expectations < Service perceived = Unacceptable quality. Expectations = Service perceived = Satisfactory Quality.

13 Challenges of Measurements in Service Quality

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15 Definition of Dimensions

16 Definition of Dimensions

17 Dimension Measurements Reliability – On time delivery performance, Errors in invoices Responsiveness – Cycle time (speed) Access – Availability (24x7), Downtime of web Credibility – Financial Ratings, Image Mix of Performance Indicators and Perception Measures

18 Causes of Service Quality Gaps (Customer Dissatisfaction)

19 Gap 1 Customer Expectations (Expected Service) Managements Perception of Customer Expectations 1.Lack of Market Research Orientation; 2.Inadequate upward communication; 3.Too many levels of management

20 Gap 2 Service Quality Specifications Management Perceptions of Customer Expectations 1.Inadequate management commitment to Service Quality 2.Perception of infeasibility 3.Absence of goal setting

21 Gap 3 Service Delivery Service Quality Specifications 1.Role ambiguity 2.Role conflict 3.Poor technology 4.Lack of team work 5.Poor employee – job fit

22 Gap 4 Service Delivery External Communications to Customers 1.Propensity to over- promise 2.Inadequate horizontal communication

23 Past ExperiencePersonal Needs Expected Service Perceived Service Service Delivery External communication to consumers Word-of-mouth Communication Converting perceptions into service quality specifications Management perceptions of consumer expectations GAP 5 GAP 2 GAP 3 GAP 4 GAP 1 Marketer Service Provider

24 Establishing Service Quality Performance Standards

25 Performance Standards Qualitative; Quantitative; Benchmark (In line with Customer expectations).

26 FedEx Service Quality Indicator (Quantitative) No. of damaged packages; No. of lost packages; Missed pickups; Aircraft delays; Reopened complaints (complaints not solved first time); Wrong day late deliveries; Right day wrong delivery; Abandoned calls; Invoice adjustment requests; Missing proof of deliveries.

27 Concluding Thoughts

28 Challenges of Performance Measurements Deciding strategy - Customer satisfaction vs. Customer delight; Developing Service Quality dimensions specific to business needs; Defining the dimensions; Developing common understanding throughout the organization - Achieving clear focus & direction; Establishing measurement framework; Utilizing measurements; Benchmark to set targets; Aligning measurement techniques with the dimensions; Addressing Service Quality Gaps.

29 Quality/ Profit Relationship Inferior Superior Relative Quality % Source: Robert Buzell & Bradley Gale, PIMS Principle

30 Conclusion Service excellence pays off richly; Superior service quality is proving to be a winning competitive strategy; Effective and appropriate Measurements can help achieve Service Excellence;

31 Thank you Q & A