Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 1
Chapter 11
Managing People
for Service Advantage
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 2
Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage
Frontline is an important source of differentiation and competitive advantage. It is: a core part of the product the service firm the brand
Frontline also drives customer loyalty, with employees playing key role in anticipating customer needs, customizing service delivery and building personalized relationships
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 3
Boundary Spanning Roles
Boundary spanners link the inside of the organization to the outside world
Multiplicity of roles often results in service staff having to pursue both operational and marketing goals
Consider management expectations of restaurant servers:
deliver a highly satisfying dining experience to their customers be fast and efficient at executing operational task of serving
customers do selling and cross selling, e.g. “We have some nice desserts to
follow your main course”
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 4
Role Stress in the Frontline
Person vs. Role: Conflicts between what jobs require and employee’s own personality and beliefs
Organization vs. Customer: Dilemma whether to follow company rules or to satisfy customer demands
Customer vs. Customer: Conflicts between customers that demand service staff intervention
3 main causes of role stress:
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 5
Emotional Labor
“The act of expressing socially desired emotions during service transactions” (Hochschild, The Managed Heart)
Three approaches used by employees surface acting deep acting spontaneous response
Performing emotional labor in response to society’s or management’s display rules can be stressful
Good HR practice emphasizes selective recruitment, training, counseling, strategies to alleviate stress
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 6
The Cycles of Failure, Mediocrity and Success
Too many managers make short-sighted assumptions about financial implications of: Low pay Low investment (recruitment, training) High turnover human resource strategies
Often costs of short-sighted policies are ignored: Costs of constant recruiting, hiring & training Lower productivity & lower sales of new workers Costs of disruptions to a service while a job remains unfilled Loss of departing person’s knowledge of business and customers Cost of dissatisfied customers
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 7
Cycle of Failure (Fig. 11.1)
Customer turnover
Failure to develop customer loyalty
No continuity in relationship for
customer
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
Empl
oye e Cyc
le
Customer C
ycle
Source: Schlesinger and Heskett
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 8
Service Sabotage (Fig. 11-A)
Customary-Private Service Sabotage
Sporadic-Private Service Sabotage
Customer-Public Service Sabotage
Sporadic-Public Service Sabotage
‘Openness’ of Service Sabotage Behaviors Covert Overt
‘No
rmal
ity’
of
Ser
vice
Sab
ota
ge
Beh
avio
rs
Rou
tiniz
edIn
term
itten
t
e.g. Waiters serving smaller servings, bad beer or sour wine
e.g. Talking to guests like young kids and putting them down
e.g. Chef occasionally purposefully slowing down orders
e.g. Waiters spilling soup onto laps, gravy onto sleeves, or hot plates into someone’s hands
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 9
Cycle of Mediocrity (Fig. 11.2)
yGood 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) Emphasison rules
vs. pleasingcustomers
Employee
C cle
Customer
Cyc
le
Promotion and pay
increases based on longevity,
lack of mistakes
Initiative is discouraged
Jobs are boring and repetitive; employees
unresponsive
Resentment at inflexibility andlack of employee initiative;complaints to employees
No incentive for cooperative relationship to obtain better service
Training emphasizes learning rules
Customer dissatisfaction
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 10
Cycle of Success (Fig. 11.3)
Cy
Low customer turnover
Customer loyalty
Continuity in relationship with
customer
High customer satisfaction
Extensive training
Employee satisfaction, positive service attitude
Repeat emphasis on customer loyalty and
retention
Higher profit
marginsBroadened job designsLowered turnover,
high service quality
Above average wages
Intensified selection effort
Employe
e cle
Custom
er Cycle
Train, empower frontlinepersonnel to control quality
Source: Heskett and Schlesinger
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 11
How to Manage People for Service Advantage?
1. Hire the right people
2. Enable your people
3. Motivate and energize your people
Staff performance is a function of both ability and motivation. How can we get able service employees who are motivated to productively deliver service excellence?
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 12
Hire the Right People
“The old saying ‘People are your most
important asset’ is wrong.
The RIGHT people are your most
most important asset.”
“The old saying ‘People are your most
important asset’ is wrong.
The RIGHT people are your most
most important asset.”
Jim Collins
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 13
Recruitment
The right people are a firm’s most important asset: take a focused, marketing-like approach to recruitment
Clarify what must be hired versus what can be taught
Clarify nature of the working environment, corporate values and style, in addition to job specs
Ensure candidates have/can obtain needed qualifications
Evaluate candidate’s fit with firm’s culture and values
Fit personalities, styles, energies to the appropriate jobs
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 14
Select And Hire the Right People: (1) Be the Preferred Employer
Create a large pool: “Compete for Talent Market Share”
What determines a firm’s applicant pool?
Positive image in the community as place to work Quality of its services The firm’s perceived status
There is no perfect employee
Different jobs are best filled by people with different skills, styles or personalities
Hire candidates that fit firm’s core values and culture Focus on recruiting naturally warm personalities
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 15
Observe Behavior
Hire based on observed behavior, not words you hear Best predictor of future behavior is past behavior Consider group hiring sessions where candidates given group tasks
Personality Testing
Willingness to treat co-workers and customers with courtesy, consideration and tact
Perceptiveness regarding customer needs Ability to communicate accurately and pleasantly
Select and Hire the Right People:(2) How to Identify the Best Candidates
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 16
Select and Hire the Right People:(3) How to Identify the Best Candidates
Employ Multiple, Structured Interviews
Use structured interviews built around job requirements Use more than one interviewer to reduce similar to me effects
Give Applicants a Realistic Preview of the Job
Chance to have “hands-on” with the job Assess how the candidates respond to job realities Allow candidates to self select themselves out of the job
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 17
The Organizational Culture, Purpose and Strategy Promote core values, get emotional commitment to strategy Get managers to teach “why”, “what” and “how” of job.
Interpersonal and Technical Skills Both are necessary but neither is sufficient for optimal job
performance
Product/Service Knowledge Staff’s product knowledge is a key aspect of service quality Staff need to be able to explain product features and to position
products correctly
Train Service Employees
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 18
Factors Favoring Employee Empowerment
Firm’s strategy is based on competitive differentiation and on personalized, customized service
Emphasis on long-term 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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 19
Control vs. Involvement Model of Management
Information about operating results and measures of competitive performance
Rewards based on organizational performance (e.g. profit sharing, stock ownership)
Knowledge/skills enabling employees to understand and contribute to organizational performance
Power to influence work procedures and organizational direction (e.g. quality circles, self-managing teams)
Source: Bowen and Lawler
Control concentrates 4 key features at top of organization; Involvement pushes them down:
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 20
Suggestion involvement Employee recommendation
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 and stock ownership
Levels of Employee Involvement
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 21
Motivate and Energize the Frontline
Job content
Feedback and recognition
Goal accomplishment
Use the full range of available rewards effectively, including:
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 22
The Inverted Organizational Pyramid (Fig. 11.5)
Frontline Staff
Top Mgmt
Middle Mgmt
Legend: = Service encounters, or ‘Moments of Truth.’
Traditional Organizational Pyramid
Inverted Pyramid with a Customer & Frontline Focus
Customer Base
Frontline Staff
Middle Mgmt & Top Mgmt
Support Frontline
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 11 - 23
The Wheel of Successful HR in Service Firms (Fig. 11.6)
Leadership that:
Focuses the entire organization on supporting the frontline
Fosters a strong service culture with passion for service and productivity
Drives values that inspire, energize and guide service providers
1. Hire theRight People
3. Motivate & Energize Your People
2. Enable Your People
Be the preferred employer & compete for talent market share
Intensify the selection process
Empower FrontlineBuild high performance service
delivery teams Extensive Training
Utilize the full range of rewards
Service Excellence& Productivity