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DOI: 10.1177/097215090901100105 2010; 11; 79 Global Business Review

Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra Customer Satisfaction in Manufacturing-oriented Services

Soft and Hard Aspects of Quality Management Practices Influencing Service Quality and

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Usha Lenka is Assistant Professor (Management Group), BITS, Pilani. Her research interest is in the area of servicequality. E-mail: [email protected], [email protected] Suar is Professor in the Department of Humanities and Social Science, IIT Kharagpur. His current researchfocuses on leadership, values and brain-behaviour relations. E-mail: [email protected] K.J. Mohapatra is Professor in the Department of Industrial Engineering and Management, IIT Kharagpur.His research areas are system dynamics, software engineering, and strategic management. E-mail: [email protected]; [email protected]

GLOBAL BUSINESS REVIEW, 11:1 (2010): 79–101

SAGE Publications Los Angeles/London/New Delhi/Singapore/Washington DC

DOI: 10.1177/097215090901100105

Soft and Hard Aspects of Quality Management Practices

Influencing Service Quality and Customer Satisfaction

in Manufacturing-oriented Services

Usha Lenka

Damodar Suar

Pratap K.J. Mohapatra

This review rationalizes that quality management practices have been adopted as a marketing strategy in thepost-liberalized economy. Evaluating the literature and theories of quality management, differences are foundin the implementation of quality management practices in manufacturing and service sectors. A criticalassessment of literature and a comparison of various quality management models divulge the variables thatare proposed to influence service quality and customer satisfaction in manufacturing-oriented services. Thesevariables are categorized as ‘soft’ and ‘hard’ aspects of quality management. The soft aspects include transforma-tional leadership, workplace spirituality, service climate, human resource management practices, employees’affective commitment and job satisfaction. The hard aspects incorporate the management information systemand physical evidence. It is rationalized that the adoption of soft and hard aspects of quality management isessential to achieve service quality and customer satisfaction.

Keywords: Customer satisfaction, manufacturing-oriented service, quality management models,service quality, soft and hard aspects of quality, workplace spirituality

A paradigm shift has taken place in the Indianindustrial scenario after economic liberaliza-tion in the 1990s. Indian industries have seen

transformation from a protected to free mar-ket regime. Global players with the latesttechnologies and better service quality have



80 � Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

Global Business Review, 11:1 (2010): 79–101

entered the Indian market challenging bothmanufacturing and service industries, bankstoo are no exception to this. This has resultedin an increased competitive situation. Cus-tomers are opting for better services availablein the market. There is tremendous pressureon managers to stop profitable customersfrom defecting. Organizations have to con-stantly innovate and create value for theircustomers to remain in the market. Further,there is need to adopt a quality managementphilosophy to cope with the challengesbrought about by economic liberalization.Quality management is a combination ofmanagement principles, practices and tech-niques to improve organizational perform-ance (Dean and Bowen 1994). With thisconceptual backdrop, this article first exam-ines the need for applying quality manage-ment practices as a marketing strategy in thepost-liberalized economy. Second, it focuseson literature and theories of quality manage-ment practices, and differentiates its imple-mentation in the manufacturing and servicesectors. Third, it scrutinizes the literatureand compares various quality managementmodels to divulge the variables that are likelyto influence service quality vis-à-vis customersatisfaction.

Need for Quality Management

Practices as a Marketing Strategy

Over time, organizations have enlarged theirstrategy from traditional marketing to servicemarketing to sustain in the market. Whiletraditional marketing focuses on the attrac-tion of a new customer, service marketing em-phasizes on customer retention. The cost ofacquisition of a new customer is more than

the retention of an existing customer. In orderto retain customers, companies need to focusnot only on quality products and services, butalso on the quality of systems and processes.Traditional marketing is transaction-basedmarketing with an emphasis on value maxi-mization (Parasuraman et al. 1985). Servicemarketing is relationship-based marketingwith an emphasis on value creation withinthe entire supply chain. Value creation is thequantification of non-financial performanceindicators of organizations like innovation inproducts and services, customer relations,management practices, technology and betteremployee relations. Service marketing cre-ates a supportive organizational climate thatbreeds trust, personal growth, creativity andinnovation among the employees, the man-agement and other departments to retainexternal customers. The concepts of servicemarketing have emerged from the servicemarketing triangle (Kotler 1994). These are:(a) external marketing that includes rela-tionships between the organization and itscustomers, (b) interactive marketing that in-corporates relationships between employeesand customers and (c) internal marketing thatdepicts relationships between the organiza-tion and its employees (Figure 1).

The marketing process to prepare, price,distribute and promote a service to the cus-tomers is called external marketing. It promisescustomers the delivery of a quality service.To deliver the promised service, employeesinteract directly with the customers. This pro-cess is known as interactive marketing. Inter-active marketing emphasizes on employeescreating a good impression on customers dur-ing service encounters. It includes employ-ees’ emotional and social interactions with



Soft and Hard Aspects of Quality Management Practices � 81


customers during the service encounter.Internal marketing is the application of themarketing approach within an organization.Each and every employee and department isan internal supplier and customer to otheremployees and departments. This leads to theintegration of various functional areas of anorganization. The organization motivates itsemployees through appropriate training, sup-port and reward system to serve external cus-tomers. Internal marketing emphasizes onachieving customer satisfaction, recognizingthe importance of employees in deliveringquality service (Kotler 1994). Service market-ing constitutes what is delivered throughinteractive marketing, how it is deliveredthrough internal marketing and what is pro-mised through external marketing.

In the post-liberalized economy, firmscompete on the basis of the service process,customer service and service offerings. To bea market leader, firms deploy state-of-the-art technology. This is an important dimen-sion in the modern market to serve customers.Parasuraman (1996) proposed a pyramidmodel of service marketing (Figure 2) as anextension of Kotler’s (1994) service market-ing triangle. It is an interaction between the

organization and technology, technology andemployees, and technology and customers.Technology helps employees to tackle com-plex service situations efficiently.

Service marketing includes both tangibleand intangible dimensions. Intangible dimen-sions are employees’ attitudes, attributesand information quality. Tangible dimensionsare products and physical evidence. In themarketing of services, in addition to the trad-itional 4Ps of marketing—product, price, pro-motion and place—physical evidence, processand people are added thereby obtaining the7Ps of marketing (Kotler 2003). The processincludes all functions that govern the deliveryof a product or service to the customer. It inte-grates the internal and external markets.People or employees of the organization con-tribute to process management and maintainbetter customer relationships through inter-active marketing. The 7Ps recognize an inte-grated effort of service delivery that is theprinciple underlying the total quality man-agement (TQM) philosophy.

The TQM approach integrates all functionsand processes within the organization toachieve continuous improvement of quality

Figure 1

Service Marketing Triangle

Source: Kotler 1994.

Figure 2

Pyramid Model

Source: Parasuraman 1996.





of goods and services. Continuous improve-ment includes human resource developmentproviding training, upgrading the manage-ment information system incorporating state-of-the-art technology and physical evidenceimproving the décor of the workplace. For ex-ample, training on soft behavioural skills andhard technical skills helps employees deliverproducts/services to meet customers’ re-quirements. In the TQM approach, quality ismaintained along the entire supply chain toattain customer satisfaction. The TQM philo-sophy emphasizes on relationship-based mar-keting (Christopher et al. 1991). According tothis philosophy, customer service is an evolu-tionary process that starts before a transactiontakes place and continues beyond the ex-change. Customer satisfaction occurs whensatisfied and loyal employees of the organiza-tion create value in their services. The em-ployees are satisfied when the internal servicequality of an organization is high.

Review of Literature

The TQM approach helps in improving busi-ness performance satisfying demands of in-ternal and external customers (Oakland 2000).Its principles and techniques are based onideas of quality management gurus Deming,Juran, Feigenbaum, Crosby and Ishikawa.They focus on technical and human dimen-sions. The technical dimensions are statisticalmethods of inspection, process control andreliability. They are used during design anddevelopment of the product. Despite differentviews about TQM, it is characterized by cer-tain quality management practices of cus-tomer focus, continuous improvement, defectprevention, performance measurement andteam work.

The US Government Accounting Office(GAO 1991), studying 20 companies thatscored well on the 1988/1989 MalcolmBaldrige National Quality Award criteria,found that quality management practices ofcustomer focus, leadership, employee train-ing, empowerment and systematic decisionmaking processes of the companies influ-enced their performance measured in termsof customer satisfaction, increased marketshare and profitability. Quality managementpractices like top management commitment,employee empowerment, workforce commit-ment, shared vision, customer focus, teamwork and supportive supplier relations areknown as ‘soft aspects’ (Dow et al. 1999;Powell 1995) and are found to enhance organ-izational performance. The soft aspects ofquality management practices help in gen-erating an organizational culture that sup-ports continuous improvement. The ‘hardaspects’ of quality management practices in-clude production-oriented aspects such asstatistical process control, just-in-time prin-ciples, technology utilization, benchmarking,systems and tools and techniques (Oakland2000; Samson and Terziovski 1999). Hardaspects of quality management practices likebenchmarking, statistical process control andTaguchi methods have influenced organiza-tional performance in DuPont, Xerox, GeneralMotors, Motorola and Ford (Kumar andGupta 1993; Taguchi and Clausing 1993). Astudy carried out in Australian and NewZealand’s manufacturing firms found thepositive influence of both soft and hard as-pects of quality management practices onorganizational performance measured interms of customer satisfaction, productivityand on-time delivery (Rahman and Bullock2005).





Implementation of quality managementpractices creates competitive advantage in themanufacturing sector (Dean and Bowen1994). It benefits organizations that imple-ment it properly (Samson and Terziovski1999). Following the success of quality man-agement practices in manufacturing, it hasbeen applied in service organizations.

Implementation of quality managementpractices in service and manufacturing firmsis different (Table 1). Manufacturing firmsdiffer from service firms in their operation,process, customer relationship and productfeatures. Manufacturing companies focus onthe process and product quality, whereas ser-vice firms focus on customer satisfaction.Factors like social responsibility and adoptionof environmental management system likethe ISO 14,000 series are more appropriate inmanufacturing firms because of the releaseof environmental wastes. Information andanalysis help manufacturing firms to procuremore quality information about defects in theproduction process that helps in decision

making. Manufacturing firms focus more onsupplier relationships as they are involved inthe product development process. Becauseof employee-customer interaction in the ser-vice sector, soft aspects of quality manage-ment practices are more important. Servicefirms use fewer hard aspects of quality man-agement practices, especially statistical pro-cess control, information and analysis, processmanagement and quality performance. Theygive more emphasis on customer satisfactionas customers judge the quality of service.

In manufacturing firms, more emphasisis given on training of advanced statisticalmethods and in service firms training includessoft behavioural aspects like communicationand interpersonal skills. However, there is notmuch difference in the application of qualitymanagement practices like leadership, strat-egic management and customer focus. Qual-ity management practices that are appropriatein manufacturing firms when replicated ex-actly in the service sector may prove to beinappropriate.

Table 1

Quality Management Practices in Manufacturing and Service Organizations

Quality Management Practices in Manufacturing Organizations Quality Management Practices in Service Organizations

Literature is prescriptive Literature is descriptiveProduct/technology focus Human focusFocus on top management commitment and visionary Focus on top management commitment andleadership visionary leadershipContinuous improvement Continuous improvementIn recruitment and selection, emphasis is on technical skills Emphasis is on interpersonal relationship and

communication skillsStatistical process control is prescribed universally Statistical process control is inappropriate in

professional servicesElimination of product defects Checks customer defectionsQuality measurement by applying statistical techniques Quality measurement through customer satisfactionPhysical evidence is not applicable Physical evidence has an impact on service quality

Source: Authors’ own.





Service organizations have been categor-ized into four types based on the degree oflabour intensity and the degree of employee-customer interaction and customization(Schmenner 1986). They are: (a) mass service,(b) service factory, (c) professional service and(d) service shop (Figure 3). Professional ser-vices and service shops are called ‘services’.Mass services and service factories are called‘manufacturing-oriented services’.

Implementation of quality managementpractices in mass services and service factoriesis similar to that in manufacturing organiza-tions. The mode of service operation is differ-ent in services and manufacturing-orientedservices (Table 2). In professional servicesand service shops, there is a high degree ofemployee-customer interaction and they pro-vide personalized knowledge-based work.Contrarily, manufacturing-oriented servicesoffer a standardized, routine type of work and

demand high usage of technology. The appli-cation of statistical process control is more ap-propriate in manufacturing-oriented servicesbecause of the assembly line nature of thework. Employees’ empowerment is more ap-propriate in professional services becauseemployees are highly skilled. To reduce em-ployee tardiness due to the routine nature ofwork, nurturing a leadership style, employeemotivation and re-training of staff are moreappropriate in manufacturing-oriented ser-vice organizations like banks, hotels and air-lines. Implementation of quality managementpractices helps in reducing repetitive pro-cesses. Customers need consistent and reli-able service of employees to make valuablepurchase decisions. Therefore, customer feed-back to improve employee performance ismore appropriate in manufacturing-orientedservices. In professional services (like doctors,lawyers and architects) and service shops (like

Figure 3

Service Process Matrix

Source: Schmenner 1986.





accounting firms and law firms) customerfeedback is not appropriate. A customer dis-satisfied with the service of a doctor or lawyerwould probably switch over to a betterservice provider. The work is regulated moreby policies and strategies in manufacturing-oriented services.

The mode of operation in manufacturing-oriented service organizations like banks con-sists of the integration of the back and frontoffice. Back office operations are technologydriven that include computers and informa-tion technology. Front office operations arepeople driven that include employees dealingwith customers at counters. The two stagesare highly interrelated. An organization co-ordinates these two stages of operations todeliver an effective service. The service qual-ity is judged on the basis of the service deli-very during service encounters. To improvethe quality of service, both human and tech-nical factors are considered. Therefore, to pro-vide a better service to the customers, thereis the need to apply quality managementpractices in manufacturing-oriented ser-vices. Florida Power and Light was the firstAmerican service firm to incorporate qualitymanagement practices.

In essence, the application of quality man-agement practices differs in service andmanufacturing-oriented service firms. Its ap-plication also depends on the demand in thetarget market. These facts have been ex-plained by the proponents of three theoriesof quality management practices. Thesetheories are discussed in the next section.

Theories of Quality Management

The quality management concept is based onthe theory of competitive advantage (Porter1985), resource based theory of the firm(Prahalad and Hamel 1990) and the systemstheory of work performance (Waldman 1994).Proponents of all these theories argue that thesuccess of a company’s competitive strategydepends on demands in the target market. Forexample, if the demand of a bank’s customersis speed and efficiency of transactions, thenthe bank will emphasize on technology up-grading and improvement in technical skillsof its employees. The bank can defend itselfagainst competitive forces. In India, with theadvent of private sector banks like the Hous-ing Development and Financial Corporation(HDFC), Industrial Credit and Investment

Table 2

Difference between Service and Manufacturing-oriented Service

Characteristic Service Manufacturing-oriented Service

Customer contact Direct Direct as well as through channels

Focus Human Human and technology

Machine/instrument usage Limited Extensive

Scope of making errors More Less

Tangibility of service Intangible Both tangible and intangible

Quality indicators Customer satisfaction Quality standard specifications, Customer satisfaction

Source: Authors’ own.





Corporation of India (ICICI), Indusind, INGVysya and the Unit Trust of India (UTI), pub-lic sector banks have also focused on tech-nology upgradation, physical evidence andfast and efficient customer service. Publicsector banks like the State Bank of India (SBI),the Punjab National Bank (PNB), AndhraBank, Canara Bank and others have incor-porated centralized banking solutions, every-day banking, ATMs and e-banking in orderto defend themselves against the threat posedby private sector banks.

In the ‘resource-based theory’, internalresources of firms like technology and peopleact as a competitive advantage. This theoryemphasizes that internal resources of firmshelp in creating a superior market position.In this theory, sustainability of advantages de-pends on competitors not being able to imitateresources. Resources include physical cap-ital (firm attributes, infrastructure), humancapital (information, knowledge, employeecapabilities) and organizational capital (infor-mation technology, financial assets). Humanand organizational capitals are the maindrivers of competitive advantage.

The systems theory examines work per-formance. Factors in a firm’s environment arethe primary determinants of its actions andresponses. Its actions are driven by the needsof its customers and relationships with itssuppliers. Quality management practices aredeployed as a means of creating competenciesin organizations. These three theories, not-withstanding their different perspectives,propose that organizations formulate theirstrategies according to market demands.

Now follows an assessment of qualitymanagement models based on the qualityaward criteria to gauge their implementation(Table 3).

Comparison of Quality

Management Models

Quality management models are based onquality awards like the Malcolm BaldrigeNational Quality Award, the EuropeanFoundation for Quality Management and theSingapore Quality Award (Samson andTerziovski 1999; Stading and Vokurka 2003).These quality awards have also been appliedto the service industry. Comparing these qual-ity management models along with Deming’smodel, differences and similarities are foundin the objectives and fundamental concepts.Each model emphasizes continuous qual-ity improvement, with the exception of theDeming’s management model that focuses onquality control.

The Malcolm Baldrige National QualityAward and the European Foundation forQuality Management models reveal thatquality management practices like leadership,policy and strategy development, peoplemanagement, resources and process, facilitateoutputs like customer satisfaction and busi-ness results. All the quality models share aset of fundamental concepts of leadership,human resource management, informationand analysis, strategic planning, customerfocus and continuous improvement as prac-ticed in high performing organizations. Theydo not focus on product or service perfection,but consider a set of quality managementpractices that influence the quality of the finalofferings. These models help organizations toidentify and measure their positions againsta set of internationally accepted criteria. How-ever, these models do not provide detailedmethods to organizations for overcomingtheir weaknesses. Moreover, these modelsclaim for universal applicability of quality





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management practices in manufacturing andservice industries. As stated earlier, the qual-ity management practices in manufacturing-oriented services cannot be applied to pureservices in toto.

Implementation of quality managementpractices is contingent upon the type of indu-stry and national culture (Sila and Ebrahimpour2002). Culture has an important effect in de-termining the quality management practicesof a firm. Culture has four dimensions(Hofstede 1997): (a) power distance, (b) indi-vidualism/collectivism, (c) masculinity/femininity and (d) uncertainty avoidance.Power distance implies a steep hierarchicalstructure and unequal power distribution.Individualism/collectivism refers to theprimacy given to the individual/the group.Masculinity/femininity deals with socialimplications of gender characteristics androles. Uncertainty avoidance implies an in-tense fear of failure in an ambiguous situation.Differences occur in the adoption of qualitymanagement practices due to uncertaintyavoidance and power distance (Mathewset al. 2001).

Evidence garnered in individualistic cul-tures of Australia and New Zealand with lowpropensity of power distance, moderate un-certainty avoidance and high masculinity islikely to be different from the culture in India(Triandis 1996). India is a vertical collectivisticculture. In India, power distance coexists withcollectivistic values of interpersonal sen-sitivity, cooperation and interdependence.Therefore, the mode of business operationsin a collectivistic culture like India that em-phasizes on social bonding with power dis-tance would be different from the mode of

business operations in individualistic cultureslike Australia and New Zealand that empha-size structural bonding with low power dis-tance (Dash et al. 2007).

These discussions makes it clear that qual-ity management practices vary in differentcultures and in the type of services. Culturalvalues in India like respect for elders, trust,reciprocity and benevolence permeate tothe employee-customer relationship. Thesuperior-subordinate relationship in Indiais treated as a teacher–student relationship.This involves subordinates’ respect for theirsuperiors and dependence on them (Sinha1995). Therefore, soft aspects of quality man-agement practices like nurturing, an inspiringand ideal leadership, workplace spiritualityand human aspects of the service quality aremore suitable in the Indian culture than in theEuro-American culture. Finally, selection ofquality management practices is contingentupon the type of industry and national cul-ture. This study reviews and rationalizes thesoft and hard aspects of quality managementpractices in Indian commercial banks.

Two Facets of Quality Management

Practices: Hard and Soft

The present banking scenario demandsspeed, efficiency and innovation. Accordingto the demand of the target market, banks areadopting state-of-the-art technology andupgrading their physical evidence to meetthe challenges of competition. People are themost important element of any service mar-keting effort. Therefore, employees’ job satis-faction and affective commitment need to bejudged. To keep employees motivated andprovide better service quality, organizations





need to have effective human resource man-agement (HRM) practices and a better serviceclimate.

From Internal Customer Satisfaction

to External Customer Satisfaction

Customer satisfaction is the main focus ofquality management initiatives that dependson the service quality offered by the employ-ees, technology and the physical evidence ofthe firm, along with the service product, priceand several other factors. Employees deliverbetter service to external customers whenthey are satisfied with their job and emo-tionally attached to the organization. This canbe achieved if employees perceive leadershipstyle, service climate, HRM practices and or-ganizational values as supportive that drivetheir behaviour towards service performance.The whole process appears as a chain reactionto attain customer satisfaction. Let us discussthe process sequentially leading to customersatisfaction.

Customer Satisfaction

Customers’ satisfaction is their cognitive oraffective response to service encounters. Ser-vice quality is the global evaluation of a firm’sservice delivery system. Service quality is themanagerial delivery of the service while satis-faction is customers’ experiences with thatservice. Improved service quality will resultin more customer satisfaction (Bitner et al.1994). This concept is based on the attitudetheory (Bagozzi 1992). According to thistheory, customers’ assessment of the product/service, its outcomes, alternative servicesavailable in the market and information

gathered from others help them to evaluatethe product/service compared to other prod-ucts/services. Cognitive evaluation throughinformation search results in customers’ af-fective response in the form of satisfaction ordissatisfaction. In such an evaluation, if cus-tomers’ expectations are met with respect tohuman, technical and tangible aspects of theservice, they are more likely to feel satisfiedwith the product/service.

Service Quality

Customers’ assessment about the servicequality of a firm depends on the service en-counter. Service quality can be assessed interms of interaction with service personnel,technology interface and physical evidence.Traditionally, service quality is the differencebetween customers’ expectations and per-formance of the service actually delivered.Parasuraman et al. (1988) suggest a measure-ment scheme using SERVQUAL that providesa 22-item scale to assess the service qualityon five dimensions of reliability, responsive-ness, assurance, empathy and tangibility. Reli-ability is the ability of employees to performthe promised service accurately. Responsive-ness is the willingness of employees to provideprompt service. Assurance is the knowledgeand courtesy of employees and their abilityto instill trust and confidence in customers.Empathy is care and individualized attentiongiven to customers. Tangibility includes phys-ical evidence of the service. These dimensionsfocus on: (a) human aspects of the servicedelivery and (b) tangible aspects of the firm.The SERVQUAL instrument has been sub-jected to criticism (Brown et al. 1993). It doesnot consider the technical aspect that is an





important dimension in service delivery pro-cess. Organizations can create a niche in apost-liberalized market by deploying state-of-the-art technology. Moreover, the SERVQUALinstrument measures service quality of a firmon customers’ perceptions and expectationsusing separate scales. Therefore, an assess-ment instrument is needed to capture bothperceptions and expectations on the human,tangible and technical aspects of servicequality.

Customers perceive a service based onattributes of service personnel and those of aservice firm. Customer-oriented attributes ofthe service personnel are called human as-pects of the service quality. These are reliabil-ity, responsiveness, assurance and empathyand are reflected in the soft quality attributesof service providers (Zeithaml and Bitner2000). Favourable interpersonal interactionsbetween customers and employees based onthese attributes can improve customer satis-faction (Parasuraman et al. 1985). Reliabilityhelps employees to consistently respond tocustomer needs and meet deadlines. Employ-ees with responsiveness and assurance havea greater knowledge about the company’sproducts, services and the needs of customers.Empathy helps in improving the commu-nication process between employees and cus-tomers. Due to the psychological and physicalcloseness that exists between employees andcustomers in service encounters, employees’attitudes often have a ‘spill over’ effect on cus-tomer satisfaction. If employees experiencefavourable affective responses in their jobs,their customers are likely to receive positiveservice experiences.

The attributes of a service firm are calledhard quality. These are the technology and

tangible aspects of service quality. The chang-ing nature of service delivery adopting speed,safety and integrity has led to the adoptionof technology. Technology invasion in Indianbanks started with the introduction of themagnetic ink character reader, currency notecounting machines and automation of frontand back office operations of the branches.Bank customers can conduct their trans-actions over the Internet, telephone, mobile,ATMs, debit cards and electronic banking.Bank branches are linked to the head officethrough centralized banking solutions in col-laboration with information technologyconsultants such as IBM, HP and Accenture.Information technology improves customerservice as it is convenient to access and use.Accurate and timely information aids man-agerial decision making for improving theoperational efficiency of the firm. Bankingtechnologies help banks and customers tokeep up-to-date information. When custom-ers use ATMs, the banks capture data abouttheir current balance and amount of with-drawal. Customers also realize the reliabilityof computer systems. All these technology-enabled transactions incur benefits to thebanks and the customers. These transactionsrequire less employees’ involvement andmore banking technologies. Technology-enabled services provide a constant and reli-able quality service.

Tangible elements include the exteriorfacilities of the firm like parking, interiordécor, furniture and the equipment used.Consumers look at these tangible elementsand infer about the firm and its service per-formance. Therefore, the physical environ-ment can have an influence on customerperception of service quality (Parasuramanet al. 1988). Accordingly, it can be proposed





that the better the human, technical andtangible aspects of bank services, the betterwill be the satisfaction of customers.

Though the service quality of a firm isdetermined by technology and the physicalevidence of the firm, it is also determined bythe services rendered by the employees. Em-ployees perform better at work if they aresatisfied with their jobs and are emotionallyattached to the organization.

Employees Job Satisfaction

and Affective Commitment

Service organizations foster employees’affective commitment and job satisfaction togauge their commitment to customer ser-vice. Employees are more productive when:(a) they have pride in their jobs, (b) when theirjobs are interesting, and when (c) they are rec-ognized for their work. Employees interactwith customers during service encountersand their emotions and attitude such as em-pathy, reliability, courtesy and assurance helpcustomers evaluate the human aspects of ser-vice quality (Parasuraman et al. 1985, 1988).According to the attitude theory (Bagozzi1992), an individual’s cognitive evaluationof events, outcomes and situations createaffective reactions that determine his/her be-haviour. If employees perceive HRM prac-tices, the leadership style of managers, serviceclimate and organizational values as sup-portive, it results in their experiencing jobsatisfaction and an emotional attachment tothe organization that elicit their behaviour interms of service performance.

Job satisfaction can be related to intrinsicand extrinsic factors (Herzberg 1966). Intrinsicfactors are internal to the job that employeesexperience while doing their jobs. These are

achievement, recognition, responsibility, ad-vancement, personal growth and the workitself. Extrinsic factors are external to the joband most of the extrinsic factors are regulatedby the top management. Extrinsic factors canbe further divided into: (a) interpersonally-mediated extrinsic factors like relationshipswith supervisor, subordinates and peers, and(b) environmentally-mediated extrinsic fac-tors like pay, working conditions, workinghours and fringe benefits. According toHerzberg’s two factor theory, intrinsic factorsaccount for satisfaction and motivation.Extrinsic factors, if present, prevent dissatis-faction but neither increase motivation norsatisfaction. The satisfaction of employeesmay be attributable to extrinsic factors or tointrinsic factors or to a combination of boththe factors (Cheung and Scherling 1999).Given the intrinsic and extrinsic factors in ajob, employees are likely to improve their ser-vice performance.

Organizational commitment comprises—(a) affective, (b) normative, and (c) continu-ance commitment (Allen and Meyer 1990).Affective commitment is employees’ emo-tional attachment to the organization. Con-tinuance commitment is the costs that theemployees associate with leaving the organ-ization. Normative commitment is employ-ees’ feeling of obligation to stay with theorganization. Organizations that satisfy theneeds and aspirations of the employeeshave more emotional attachment to them.These employees accept organizational goals,work sincerely and promote service quality.

Leadership

As service delivery occurs through humaninteraction, employees play a major role in





service delivery. Therefore, there is a need fora manager who can guide employees to per-form optimally. An effective leadership styleof managers is essential for the implementa-tion of quality management programmes. Theleadership style of managers is a central agentfor employees’ performance and businessexcellence (Kanji 2003). Leaders integratevarious functions and practices of the organ-ization to provide a clear vision, purpose anddirection. Their attitude promotes qualitymanagement practices of customer focus, pro-cess improvement, people performance andcontinuous improvement. Employees receiv-ing support from their managers reciprocateproviding more effort in work. SouthwestAirlines has made a high place in the list ofFortune 500 companies due to its strongleadership, excellent employee-customer rela-tions and organizational training as sourcesof employee motivation. Managers who haveextensive knowledge of customers’ expecta-tions can formulate activities to achieve cus-tomer satisfaction. The quality of supervisioninfluences job satisfaction and the serviceperformance of the firm (Burke 2001). Leader-ship is related to process improvement, teamwork and employee satisfaction (Foster et al.2002). Supervisors play an important role increating a positive work climate that bene-fits employees and helps in delivering qual-ity service. Considerate behaviour from thesupervisor fosters employees’ identificationwith the organization while a supervisor’sinconsiderate behaviour increases employees’hostility towards the administration.

A leader possessing positive traits/char-acters, showing concern for followers and in-spiring them is more likely to succeed. Sucha leader is called a transformational leader

who inspires, motivates and energizes fol-lowers to attain higher levels of performance(Bass 1985). Transformational leaders aremore likely to succeed irrespective of nationalcultures and types of organizations, becausethey motivate their subordinates to performbeyond expectations and create an advantagefor the firm. The dimensions of transfor-mational leadership include: (a) idealizedinfluence, (b) inspirational motivation, (c) in-tellectual stimulation and (d) individualizedconsideration. Idealized influence is the abil-ity of the leader to provide followers a clearsense of purpose and vision. An intellectuallystimulating leader encourages followers tothink critically. Inspirational motivationincludes motivating followers to do their jobsand leading to higher performance, commit-ment and satisfaction. A leader displayingindividualized consideration pays specialattention to each employee’s abilities, aspira-tions and needs. S/he identifies the deficien-cies and removes these through education,coaching and counselling. Transformationalleaders bring in employees’ job satisfaction,commitment, trust and performance (Avolioet al. 2004). Given the transformationalleadership of senior managers in banks, man-agers down the line are better cared for andsatisfied with their jobs to serve externalcustomers.

A transformational leader possesses thetrait of charisma, inspires followers and com-pensates for their deficiency. The leader in-spires subordinates to be creative and findnovel ways of solving problems. S/he listensto the employees, provides them with neededguidance, increases subordinates’ confidenceand creates a supportive environment. S/herevives the higher order needs of employeesby providing a vision. Such support from a





leader leads to employees’ job satisfactionand emotional attachment towards theorganization.

Workplace Spirituality

Due to globalization of markets, businessorganizations are experiencing internal tur-moil. Companies are transforming theirworkplaces. Organizations have becomeflatter and more customer-centric. Employeesare given more responsibilities. They come tothe workplace with a set of beliefs, values andbehaviours to: (a) make their relationshipsbetter, (b) experience and enjoy the differencesand diversities in the workplace and (c) im-prove the standard of work. If an organizationinfuses spirituality in the workplace, theemployees produce high quality of productsand services.

Workplace spirituality is a framework oforganizational values. The construct consistsof seven dimensions (Ashmos and Duchon2000): (a) conditions of community, (b) mean-ingful work, (c) inner life, (d) blocks to spiritu-ality, (e) personal responsibility, (f ) alignmentwith organizational values and (g) contem-plation. These dimensions focus on indi-viduals’ personal values and work values.Personal values include an individual’s per-ceptions about spirituality. Work values in-clude a person’s perceptions about values thatare desirable in the workplace. Work valuesare meaningful work, conditions for commu-nity and alignment with organizationalvalues. Meaningful work includes what isimportant and joyful about the work. Givenmeaningful work, employees express theircreativity and perform their tasks. They canperform better in an encouraging and caringwork environment. They learn new skills and

competencies, and become more know-ledgeable. Tasks that provide avenues forpersonal growth, learning and creativity arelikely to enhance employees’ satisfaction withthe job and emotional attachment to theorganization.

Conditions for community include havingaffiliations with other employees. Employeesworking with supportive co-workers becomecreative, because social support from collea-gues buffers stress. Employees spend time atwork and it becomes a source of identificationwith the organization. Developing a sense ofcommunity is based on Theory YZ that is acombination of Theories XY (McGregor 1960),and Z (Ouchi 1980). The Theory YZ focuseson healthy employee relations. Such bondingcannot negate the employees’ positive atti-tude towards the job and emotional attach-ment to the organization.

Being associated with a good organizationprovides the employees a sense of self-worth.They identify with an organization with asense of pride that drives their work behavi-our. Southwest Airlines inculcates among itsemployees a feeling that they are part of anorganizational family and employees takecare of each other as well as their customers.The interaction of the employee and the or-ganization is reciprocal. Organizational valueshelp in guiding employees’ behaviour atthe workplace. These values are benevolence,humanism, integrity, justice, mutuality, re-spect, responsibility and trust. Individualsexperience satisfaction with their jobs andemotional attachment to the organizationwhen their personal values match with theorganization’s values. The work values con-gruent with the mindset of the employeeshelp them to better serve clients. Workplacespirituality positively influences employees’





work attitudes (Neck and Milliman 1994).Joyful work, a strong sense of community andcongruency of individual values with organ-izational demands are likely to increase em-ployees’ satisfaction with the job and affectivecommitment to the organization (Millimanet al. 1999).

Service Climate, Job Satisfaction

Service climate is the shared perception ofemployees about the organizational policies,practices and procedures that promote cus-tomer service (Schneider et al. 1998). Em-ployees’ favourable perception of the serviceclimate increases their work effort. Theyprovide better service quality when organ-izational practices are conducive.

Service climate includes customer orienta-tion, managerial practices and customerfeedback. Customer orientation is the degreeto which an organization emphasizes onmeeting customer needs and expectations. Itis enhanced by recruiting, training and re-warding people to deliver an excellent ser-vice. Employees’ behaviour is regulated bythe demands of the target market. If the focusof the organization is on customer service,employees who have service motivation andvalues will be hired and they will be trainedand rewarded for effective service delivery.Employees’ feel encouraged when they per-ceive that the management values and caresabout service. The managerial practice/sup-port results in employees’ positive behavioursuch as innovation, decreased absenteeism,increased performance and affiliation to theorganization (Eisenberger et al. 2001). Em-ployees show loyalty to the organization andwork diligently. Managerial practices increase

employees’ job satisfaction (Babin and Boles1996) and affective commitment (Settoonet al. 1996). Customer feedback incorporatesbuyers’ opinion regarding the service qualitydelivered by the employees. In interactiveservices like banks, feedback from custom-ers motivates employees to improve upontheir past performance (Schneider et al.1998). According to the social network theory(Krackhardt 1992), the interaction betweenemployees and customers helps in assessingthe current demands and needs of custom-ers and can be a source of intrinsic motivationfor higher performance.

The mission of the service organization isto achieve quality customer service. Employ-ees find their work to be meaningful whenthey successfully achieve this target. Employ-ees feel motivated when they receive positivefeedback from the customers and recognitionfrom peers and seniors. They realize that theorganization values their contributions andtakes care of them. Employees feel satisfiedwith their jobs and emotionally attached tothe organization when their work is recogn-ized and reward is administered justifiably.According to the organizational justice theory(Folger and Cropanzano 1998), fairness in theappraisal procedure (timeliness, feedback andgoal-setting) can result in distributive out-comes of satisfactory pay and promotion.Their motivation to work depends on themeaningfulness of the work, responsibility foroutcomes of the work and knowledge of theresults of the work. In the job characteristicsmodel (Hackman and Oldham 1976), thesepsychological states affect employees’ workbehaviour in terms of job satisfaction andorganizational commitment. Further, man-agement support reduces employees’ burnout





and they exhibit a high affective response tothe organization. Therefore, job attributes,justice in reward administration (Folger andCropanzano 1998) and management supportare essentials for job satisfaction and affectivecommitment.

Human Resource Management Practices

HRM is an important quality managementpractice. There are two categories of HRMpractices: skill- and motivation-oriented.Skill-oriented practices include recruitment,training and skill development, whilemotivation-oriented practices include perfor-mance appraisal, reward and compensation.The inherent plea is that employees who feelwell-treated by the management’s HRMpractices can effectively treat their customers.

According to the socio-technical systemstheory (Emery and Trist 1960), careful recruit-ment and selection of employees can developa committed workforce. It identifies pro-spective employees who will fit well with thehiring organization and its target market. Anewly hired employee is more likely to be in-trinsically motivated and satisfied when his/her values match with the values of the organ-ization. Service organizations recruit andselect employees possessing service attributes(Schneider and Bowen 1992). According to theresource-based theory (Prahalad and Hamel1990), the firm’s human resources must berare and inimitable to create a competitive ad-vantage. Following the employees’ hiring,organizations train and develop them.

Training and development programmesenhance the existing skills, knowledge andattitude of the employees for making themcourteous, caring, responsive and empathetic.Following training, employees acquire not

only effective listening and interpersonalskills but also problem solving and technicalskills essential for the service. Training inputsprovide employees with the abilities that theorganization will need in the future. Theyhelp employees to remove deficiencies. Train-ing coupled with career advancement, pro-motion and job security, positively influencesemployees’ affective commitment.

Performance appraisal has two purposes.First, it makes employees aware of theirachievements, successes and failures and howthey can improve and develop themselves.Second, it helps senior managers to take deci-sions regarding wages and salaries, careerplanning, transfers, promotions and person-job matching. Fairness associated with theappraisal procedures results in employees’satisfaction and their emotional attachmentto the job and the organization.

Employees feel more satisfied and moti-vated if they are rewarded and recognized fortheir worthy contributions. Rewards likeflexible pay, bonus, recognition and the inter-esting nature of work lead to job satisfaction.Along with these rewards, training and devel-opment and satisfactory performance ap-praisals enhance employees’ emotionalattachment to the organization.

Not only the ‘soft’, but also the ‘hard’ tech-nical and physical aspects influence the ser-vice quality. We shall now discuss the ‘hard’aspects.

Management Information System

Successful implementation of quality man-agement practices calls for changes in or-ganizational processes which include the





information system and the physical envir-onment. In order to remain competitive, or-ganizations need to have a well-developedinformation system, besides other infrastruc-ture such as proper utilities, location andenvironment. To support quality manage-ment, the organization’s information basemust be comprehensive and easy to use. TheMalcolm Baldrige National Quality Awardand the European Foundation for QualityManagement models suggest that the infor-mation system helps in the implementationof quality management to integrate all usefuldata to improve quality, cost and service deli-very. It helps in sustaining quality manage-ment through effective coordination, use andtransfer of information. A quality informationsystem uses networks, client-server com-puting, database, integration tools and tech-nology effectively to provide performancefeedback to serve clients.

Some service organizations like banks havebeen upgrading their management infor-mation systems and physical evidence orservicescape in order to have a competitiveadvantage. Management information systemsare needed to sustain high quality servicedelivery that meets the needs of customers.Support systems such as appropriate tech-nology, equipment and service-oriented inter-nal processes are essential for the delivery ofquality services (Sureshchandar et al. 2002).Organizations use information technologysuch as the Internet and Intranet to commu-nicate and exchange ideas. Internet techno-logies help departments and enterprises toreach business partners and consumers toachieve strategic and operational benefits.McDonald trains and educates its employeeswith information technology and expert sys-tems to improve customer satisfaction.

Therefore, a management information systemwould enhance service quality.

Physical Evidence

The servicescape or physical evidence con-veys to the customers an external image ofthe service package. The physical evidencedifferentiates a firm from its competitors andsignals the market segment about its service.According to the stimulus-organism-responsetheory proposed by Mehrabian and Russell(1974), physical evidence (stimulus) of theorganization can influence employees’ andconsumers’ (organism) behaviour (response).Individuals react to places with two oppositeforms of behaviour: approach and avoidance.The approach behaviour includes all positivebehaviour such as desire to stay, explore,work and affiliate towards the built and na-tural environment. The servicescape influ-ences employee-customer interactions ininterpersonal spaces like banks and hotels.Environmental variables can influence con-sumer behaviour in service settings (Turleyand Milliman 2000). Disney uses physicalevidence of its service to excite and stimulateits customers.

Physical evidence is important for a bankas it helps customers develop an image of thebank. If a bank wants to have a user-friendlyimage, its interior décor will have a comfort-able seating arrangement, pleasant lighting,temperature and cleanliness. On the otherhand, if a bank wants to have a hi-tech andefficient image, the interior design will showcomputers with the latest technology and net-work connectivity and convenient and easilyaccessible counters. In the post-liberalizedeconomy, Indian public and private sector





banks like the State Bank of India, the PunjabNational Bank, Canara Bank, Allahabad Bank,ICICI and HDFC have reformed their work-place layouts that present a fast, efficient andconsumer-friendly image. Therefore, a morefavourable perception of servicescape willpositively influence the tangible aspects ofservice quality.

All the linkages discussed earlier, leadingto service quality and customer satisfactionare given in Figure 4. To sum up, what wehave pleaded is that customer satisfaction isderived from service performance that in-cludes the human, technical and physicalaspects of the service firm. Human aspectsof service delivery depend on the employee’ssatisfaction with the job and his/her emotional

attachment to the organization. Employeesprovide a better service when they operatein a work environment that has a supportiveleadership style, better HRM practices,customer-oriented values and a conduciveservice climate. The hard aspects of the man-agement information system and physicalevidence of the firm also contribute towardsbetter service performance and help in achiev-ing customer satisfaction.

Conclusion

Quality management focuses on customer-oriented service processes. For implementa-tion of quality management, the soft and hard

Figure 4

Conceptual Model of Quality Management Practices Influencing Service Quality and Customer Satisfaction

Source: Authors’ own.Note: + indicates direct positive relations.





aspects are essential. ‘Soft’ aspects are trans-formational leadership, workplace spiritual-ity, service climate, HRM practices, employees’affective commitment and job satisfaction.‘Hard’ aspects are the management informa-tion system and physical evidence. Servicedelivery by its very nature is concerned withthe intricacies of human interactions. There-fore, human issues involved with the servicedelivery are more likely to be important inmanufacturing-oriented service organiza-tions like banks and hotels, particularly incollectivistic cultures. Quality managementdoes not measure customer satisfaction dir-ectly but there are certain key business elem-ents related to the human factors of theenterprise which play a prominent role inachieving quality management. Our argu-ments suggest that the quality managementprocess is best viewed as a gestalt, and canbe realized if all the soft as well as hard as-pects work in unison to achieve service qual-ity and customer satisfaction.

Culture has an important effect in deter-mining the quality management practicesof a firm. A qualitative study carried out inGreek service industries found that the hardaspects of quality management practices aremore important (Psychogios and Priporas2007). Portuguese companies use hard qualitymanagement practices that are fact and meas-urement based such as statistical process con-trol and ISO 9001 to reduce costs (Earley andErez 1999). Portuguese and Greek cultureswith a high propensity of uncertainty avoid-ance have chosen documented systems andmanagement-by-fact approaches. These argu-ments create an avenue for further enquiryas to how the application of soft and hard as-pects of quality management practices variesacross cultures and industry. There is paucity

of empirical research on quality managementpractices in the service sector. Studies can bedone in the Indian cultural context as per thepropositions in the manufacturing-orientedservice that will result in service qualityvis-à-vis customer satisfaction (see Figure 4).

Customer satisfaction is an importantglobal issue as organizations are more ser-vice oriented. It can be achieved by adoptinga transformational leadership style of themanagers, HRM practices, service climate,workplace spirituality and latest informationtechnology. Earlier studies on quality man-agement reveal the importance of leadership,but this study highlights the importance ofthe transformational style of senior managersin maintaining quality in the Indian bankingsector. Further, workplace spirituality hasbeen newly introduced in quality manage-ment literature that inculcates certain humanvalues in the organization to provide a healthyworking environment to reduce employees’stress, increase fitness and concentration andfinally improve productivity. These qualitymanagement practices develop a high per-formance work system in the organizationthat establishes a relationship between in-ternal customers’ satisfaction leading to exter-nal customers’ satisfaction. The organizationintegrates the customer satisfaction strategywith the strategies of employee satisfaction,the leadership style of managers, organiza-tional values and information technology toachieve a balance scorecard approach.

The balance scorecard identifies customers,employees, technology, innovation and learn-ing and financial perspectives as drivers forsuccess in an organization. Barring financialperspectives included in the balance score-card, this model can be a strategic manage-ment framework that creates value through





investment in these resources. It focuses oncross-functional integration, continuous im-provement, employee-customer relationshipand teamwork that fit well into the qualitymanagement philosophy.

The results of quality management im-plementation can be seen in the long-run. Itis a management philosophy to develop agood quality management system. If quality

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