1. PowerPoint Presentation by Charlie Cook Copyright © 2005 South-Western. All rights reserved. Chapter 14 Managing Services

2. Copyright © 2005 South-Western. All rights reserved.14–2 The Nature and Importance of Services Service defined  An intangible product that:  Involves human or mechanical effort.  Is instantaneously perishable.  Creates a situation where a transaction for the product and consumption of the product occur at the same time.  Cannot be created, stored and/or used at some time after the transaction between buyer and seller.

3. Copyright © 2005 South-Western. All rights reserved.14–3 Nature and Importance of Services (cont’d) Exhibit 14. 1 A Continuum of Product Tangibility

4. Copyright © 2005 South-Western. All rights reserved.14–4 Characteristics of Services Intangibility  The quality of not being able to be assessed by the senses of sight, taste, touch, smell, or hearing. Inseparability of production and consumption  Services are produced by the service provider and consumed by the customer at the same time. Perishability  Unused services can’t be stored and used at a later date. Heterogeneity  The inconsistency or variation in human performance.

5. Copyright © 2005 South-Western. All rights reserved.14–5 Classifying Services Classification scheme for services answers these questions:  Does the customer have to be present to initiate or terminate the service transaction?  Does the customer have to be present for the service to be delivered?  Does the customer participate in the service transaction?  Is the customer or target of the service changed in some way after the service transaction is completed?  Is there a high degree of labor intensiveness?  How much skill is required of the service provider?

6. Copyright © 2005 South-Western. All rights reserved.14–6 Classifying Services (cont’d) Categories Examples Type of market Consumer Life insurance, car repairs Organizational Lawn care, management consulting Degree of labor intensiveness Labor based Repairs, executive recruiting Equipment based Public transportation, air travel Degree of customer contact High contact Hotels, healthcare Low contact Dry cleaning, motion pictures Skill of the service provider Professional Legal counsel, accounting services Nonprofessional Taxi, janitorial Goal of the service provider Profit Financial services, overnight delivery Nonprofit Government, education Management Highlight: Classification of Services

7. Copyright © 2005 South-Western. All rights reserved.14–7 Quality/ Productivity in Service Organizations Service quality  The conformance of the service to customer specifications and expectations.  Service-quality improvement centers on the quality theme of exceeding customer expectations.  As the extent to which the service is tangible increases, consumers’ expectations of service quality also increase.  Reliability is the most important determinant of service quality.

8. Copyright © 2005 South-Western. All rights reserved.14–8 Quality/ Productivity in Organizations (cont’d) Criteria Examples Reliability:Consistency in performance Accuracy in billing and recordkeeping and dependability Performing the service at the designated time Tangibles:Physical evidence of the service Physical facilities Appearance of personnel Tools of equipment used to provide the service Responsiveness:Employees’ willingness Mailing a transaction slip immediately or readiness to provide Calling the customer back quickly service Giving prompt service (e.g., setting up appointments quickly) Assurance:Employee’s knowledge and Knowledge and skill of contact personnel ability to convey trust andCompany name or reputation confidence Personal characteristics of contact personnel Empathy:Caring and individualized Learning customers’ specific requirements attention to the customerProviding specialized individual attention Consideration for the customer Management Highlight: Criteria for Judging Service Quality

9. Copyright © 2005 South-Western. All rights reserved.14–9 Quality/ Productivity in Organizations (cont’d) Management Commitment Employee Commitment Recognition and Reward Components of Service Quality

10. Copyright © 2005 South-Western. All rights reserved.14–10 Quality/ Productivity in Organizations (cont’d) Service productivity  The output per person per hour of services.  Productivity improves when the volume or value of output increases relative to the volume or value of inputs.  Productivity improvements come from designing a system that utilizes both the skills of the people in the organization and available technology.

11. Copyright © 2005 South-Western. All rights reserved.14–11 Quality/ Productivity in Organizations (cont’d) Service productivity (cont’d)  Critical success factors  An approach to boosting worker productivity by determining those things that must go right in order to succeed in achieving service goals and objectives.  Three stages of this method are: –Listing goals and objectives. –Identifying the critical success factors necessary to achieve the goals and objectives. –Suggesting ways in which the critical success factors are to be measured.

12. Copyright © 2005 South-Western. All rights reserved.14–12 Quality/ Productivity in Organizations (cont’d) Developing a performance culture  Performance culture: an organization in which everyone can do his or her best work. Components of peak performance  Discretionary effort: the difference between the minimum effort a worker must expend to not be penalized (acceptable performance) and the maximum effort a person can bring to a job.  Peak performance: the sum of acceptable performance and discretionary effort.

13. Copyright © 2005 South-Western. All rights reserved.14–13 Quality/ Productivity in Organizations (cont’d) Exhibit 14. 2 Discretionary Effort Component of Different Jobs

14. Copyright © 2005 South-Western. All rights reserved.14–14 Quality/ Productivity in Organizations (cont’d) Achieving peak performance  Organizations can foster additional discretionary effort by:  Empowering employees by giving them autonomy and responsibility for results.  Focusing on employees’ strengths and investing in employees.  Rewarding employees and celebrating successes.  Building better communication through a responsive organizational structure.