Management Control of Service Operations

• Characteristics of Services
• Generic Techniques for Control of Services
• Classification of Service Organizations
• Control of Different Categories of Service Organizations

Reading: Chapter 13 of Text Book

 Characteristics of Services

• Features of services that distinguish them from

manufacturing or product businesses
– Intangibility
– Heterogeneity
– Inseparability
– Perishability
 Generic Techniques for Control of Services
• Service Blueprinting: Process of designing Service Blueprint
– All activities involved in service have to be identified
– Activities that may create problems in Delivery Process are identified
– Deciding time that Service Delivery Process should take (to make
maximum profit, also maintain service quality & reputation of firm)
• Well-designed Blueprint
– Encourages a controlled service delivery process, to reduce variations
in quality of a service
– Provides precise picture of process to be followed, minimizing
chances of misinterpretation
– Helps marketing department in identifying need for redesigning
existing services and also developing new services
– Helps HR department in identifying recruitment, training and
development needs, and need to redefine performance standards
– Mapping time to be spent on each activity, helps employees in better
time management
– Mapping service features can highlight features which are considered
important by customers, eliminate those perceived as unnecessary
 Generic Techniques for Control of Services…
• Capacity Management: Managing demand and supply of services
– Issues faced in Service Organizations: Maintaining quality of service
given to customers, Level of Demand Uncertainty, Adapting
Capacity to fast changing demands of market
– Problems arise due to service characteristics like intangibility,
perishability, and inseparability
– Holding inventory is not feasible in service industry; managing
demand and supply becomes crucial
– In Professional Services, capacity once lost cannot be reused, and is
a source for sales & profit losses
• Capacity Management Strategies
– Customer Development
– Bundling
– Differentiation
• Queueing theory
• Productivity is basis for Planning & Control of Service Operations
 Generic Techniques for Control of Services…
• Yield Management: Used in situations where
– Capacity of organization cannot be modified, such as number of
available seats in a plane, number of doctors in a clinic…
– Demand can be classified into groups (Ex: Premium vs. Budget
category..)
– Services cannot be stored, and perish if unused (Ex: in-flight services
offered in Aircrafts)
– Products are sold and delivered at different times
– High amount of uncertainty in demand
– Costs involved in modifying capacity are higher than production or
sales costs (adding more seats to an aircraft)
• Control through Yield Management
– Economics-Based models: Premium and Discounted offerings
– Threshold Curve: Constructed using past data, and trends analyzed
in terms of historical aggregate demand patterns
• Based on seasonality or other factors that influence demand, specific
buffer is provided to deal with demand variations (Ex: Hotel Rooms)
 Service Quality Management
Quality : Depends upon how customer perceives what he/she gets
and whether it meets his/her expectations

Three main components of Service Quality

• Physical Facilities and Processes
– Place of operation, Ambience, Types of services offered, and
Process
• People’s Actions
– Punctuality, Way of interaction, and Problem Resolving
Capability
• Professional Opinion
– Integrity, Knowledge, and Experience of Professional in domain
Service Quality Determinants
 Evaluating Service Quality
• Service Quality Audit & Customer Feedback
• Six Sigma for Service Quality
– Benefits of implementing Six Sigma:
• HR: Organization can achieve better cross-functional teamwork
• Improvement in job satisfaction and in employee morale, due to greater
understanding of problem-solving methods
• Operational Front: Quality of decisions is improved as decisions are
based on facts rather than assumptions
• Service Delivery is fast due to minimizing steps that do not add value
• Minimization of costs incurred due to late delivery, complaints, etc.
• Enhanced consistency of results due to reduced process variability
– Issues in implementing Six Sigma:
• Non-availability of accurate and complete data
• Data has to be acquired from customers, and organization may not have
enough control on Quality of Data
• Difficult to measure customer satisfaction: Higher levels of human
interactions>> behavioral aspects can influence customer satisfaction
 Service Recovery
Service Failure and Customer Switching problems >> Service
Recovery approaches
8 different reasons relating to service failure, that cause customers
to switch to other service providers
(a) Core service failures
(b) Service encounter failures
(c) Price failures
(d) Inconvenience
(e) Employee response to service failures

(f) Attraction by competitors

(g) Ethical problems
(h) Involuntary switching
Reasons a), b), c), d) and e) above can be addressed by service
recovery
Dimensions for Classification of Service Organizations
Classification of Service Organizations
Control of different categories of Service Organizations
Professional Services (PS) (Consulting Firms)
– High dependency on service providing personnel, hence
important to focus on HRM aspects
• Necessary for organization to be careful & choosy about people hired
– Greater emphasis on personnel control than on behavioral control
• Activities like training & welfare programmes become important
– Customers have varied expectations, hence important to hire
highly-skilled people, with discretionary decision-making skills
• Firms need to give authority to employees, to use their discretion in
handling customers
• Degree of authority passed on to employees, will depend on type of
service provided, and business that firm is involved in
– Customer-references are crucial in expanding business
• Important for firms to minimize mistakes, and strive to give better
service to customers (Ex: Audit Firms)
https://www.chicagotribune.com/news/chi-0209010315sep01-story.html
Control of different categories of Service Organizations
Mass Services (Retail Banking)
– Characterized by low degree of variation and high throughput time
– Throughput time can be reduced by identifying & eliminating sources
of waste: inconvenient locations of facilities; waiting; unnecessary
steps in process, defects in service
– Focus on reducing waste, to achieve lower throughput time & higher
productivity
– Elimination of wastes can result in higher service quality, enhancing
reliability, accessibility & responsiveness
– Tangibles, Responsiveness, Competence, Access, and Reliability are
important Service Quality determinants
– Customers may quickly perceive lower responsiveness , due to lower
degree of variations (handled by training workforce in required skills)
– Due to standardized services, firms may face a problem in attracting
and retaining customers
– Proper monitoring of customer feedback should be carried out, to
increase customer retention and customer loyalty
Control of different categories of Service Organizations
• Service Shops (Restaurants, Hospitals)
– Characterized by high degree of variations and lower throughput time
– Focus is on reducing variations through standardizing services,
spreading O/H Costs over more service units, without compromising
on throughput time

• Service Factories (Fast Food Restaurants, Low-cost Airlines)

– Characterized by low degree of variations and low relative throughput
time
– Expected to be more productive than other categories of service
organizations in same industry
– Service Quality Determinants are Tangibles, Responsiveness,
Recovery, and Competence
– Require development of SOPs, with very little improvisation from
employees in handling customers
– Necessary to have employees who are well-versed in SOPs