Chapter 11

Managing People for Service Advantage

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

11 - 1

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

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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

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Role Stress in the Frontline

3 main causes of role stress:
Person vs. Role: Conflicts between what jobs require and

employees 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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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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 societys or

managements 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

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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 persons knowledge of business and customers Cost of dissatisfied customers

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Cycle of Failure (Fig. 11.1)

Customer turnover

Repeat emphasis on attracting new customers

Failure to develop customer loyalty

Low profit margins

High employee turnover; poor service quality No continuity in relationship for Employee dissatisfaction; customer poor service attitude

Narrow design of jobs to accommodate low skill level

Use of technology Emphasis on to control quality rules rather than service Payment of low wages Minimization of selection effort Minimization of training

Customer dissatisfaction

Employees become bored

Employees cant respond to customer problems

Source: Schlesinger and Heskett

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Service Sabotage (Fig. 11-A)

Routinized

Normality of Service Sabotage Behaviors

Openness of Service Sabotage Behaviors

Covert Overt

Customary-Private Service Sabotage e.g. Waiters serving smaller servings, bad beer or sour wine

Customer-Public Service Sabotage

e.g. Talking to guests like young kids and putting them down

Sporadic-Private Service Sabotage e.g. Chef occasionally purposefully slowing down orders

Sporadic-Public Service Sabotage e.g. Waiters spilling soup onto laps, gravy onto sleeves, or hot plates into someones hands

Intermittent

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Cycle of Mediocrity (Fig. 11.2)

Customers trade horror stories Other suppliers (if any) seen as equally poor Employees spend working life in environment of mediocrity Narrow design of jobs No incentive for cooperative relationship to obtain better service Complaints met by indifference or hostility

Employee dissatisfaction (but cant easily quit)

Emphasis on rules vs. pleasing customers

Jobs are boring and repetitive; employees unresponsive Resentment at inflexibility and lack of employee initiative; complaints to employees

Training emphasizes Success = learning rules not making mistakes Service not focused on customers needs Good wages/benefits high job security

E Promotion and pay increases based Initiative is on longevity, discouraged lack of mistakes

Customer dissatisfaction

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Cycle of Success (Fig. 11.3)

Low customer turnover

Repeat emphasis on customer loyalty and retention

Customer loyalty

Higher profit margins Broadened job designs

Lowered turnover, high service quality Continuity in relationship with customer Employee satisfaction, positive service attitude

Train, empower frontline personnel to control quality

High customer satisfaction

Extensive training

Above average wages Intensified selection effort

Source: Heskett and Schlesinger

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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How to Manage People for Service Advantage?

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?

1. Hire the right people

2. Enable your people

3. Motivate and energize your people

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Hire the Right People

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

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Recruitment

The right people are a firms 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 candidates fit with firms culture and values Fit personalities, styles, energies to the appropriate jobs
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Select And Hire the Right People: (1) Be the Preferred Employer
Create a large pool: Compete for Talent Market Share

What determines a firms applicant pool?

Positive Quality

image in the community as place to work

of its services

The

firms perceived status

There is no perfect employee

Different Hire

jobs are best filled by people with different skills, styles or personalities candidates that fit firms core values and culture on recruiting naturally warm personalities
Services Marketing 5/E

Focus

Slide 2004 by Christopher Lovelock and Jochen Wirtz

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Select and Hire the Right People: (2) How to Identify the Best Candidates

Observe Behavior
Hire
Best

based on observed behavior, not words you hear

predictor of future behavior is past behavior group hiring sessions where candidates given group tasks

Consider

Personality Testing
Willingness

to treat co-workers and customers with courtesy, consideration and tact regarding customer needs

Perceptiveness

Ability

to communicate accurately and pleasantly

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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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

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Train Service Employees

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
Staffs product knowledge is a key aspect of service quality Staff need to be able to explain product features and to position

products correctly

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Factors Favoring Employee Empowerment

Firms 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

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Control vs. Involvement Model of Management

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/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 Services Marketing 5/E

Slide 2004 by Christopher Lovelock and Jochen Wirtz

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Levels of Employee Involvement

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

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Motivate and Energize the Frontline

Use the full range of available rewards effectively, including:

Job content Feedback and recognition Goal accomplishment

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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The Inverted Organizational Pyramid (Fig. 11.5)

Customer Base Top Mgmt Middle Mgmt Frontline Staff Frontline Staff

Middle Mgmt & Top Mgmt Support Frontline Inverted Pyramid with a Customer & Frontline Focus

Traditional Organizational Pyramid

Legend:

= Service encounters, or Moments of Truth.

Services Marketing 5/E

Slide 2004 by Christopher Lovelock and Jochen Wirtz

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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 the Right People

Be the preferred employer & compete for talent market share Intensify the selection process

3. Motivate & Energize Your People

Utilize the full range of rewards

Service Excellence & Productivity 2. Enable Your People

Empower Frontline Build high performance service delivery teams Extensive Training

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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