Managing service the human factor

unit 5
Introduction
• Good stories and bad stories
• Service personnel
• Human factor-employees and the customers
• HRM
• Focus on those jobs who have extensive contact with
the customers
• Creating the cycle of success
The trinity of management functions
• Marketing, operation and human resource functions are
interrelated
• Interdependence in service management
• Came out from ‘servuction model’ of how services are
created and delivered
• Labour was seen as the cost whereas now employees are
seen as the partner and contributors
• All managers gets involved in the issues that affects their
departments
The Servuction Model
( the service experience)
• Model used to illustrate factors that
influence service experience, including
those that are visible and invisible to
consumer.
• Invisible component consists of invisible
organizations and systems.
 The Servuction Model
( the service experience)
• Visible part consists of 3 parts: inanimate environment,
contact personnel/service providers, and other
consumers.
• Inanimate environment: All nonliving features present
during service encounter.
• Contact personnel: :Employees other than primary
providers that interact with consumer.
The Servuction Model
 Servuction system
THE INANIMATE ENVIRONMENT:
• All non-living features present in the service encounter
• Create tangibility in intangible service parameters
• Consumers look for tangible cues surrounding the
service on which to base their service performance
evaluation
• Furniture, flooring, lighting, music, carpets, stationery,
clothes worn by service providers
 Servuction system

CONTACT PERSONNEL / SERVICE PROVIDERS:

• Contact personnel: employees other than the service provider
briefly interacting with the customer (parking attendant,
receptionist, telephone operator, floor manager)
• Service providers: primary service providers (waiters, dentist,
painter)
• Could be at service provider’s location or at consumer’s location
• Whether the service is provided at the provider’s location or the
customer’s location, the impact of the service is huge
 Servuction system
OTHER CUSTOMERS:
• Consumption of services are called as “Shared
Experiences” since they often occur in the presence of
other customers
• Other customer (Customer B) experiences can impact the
service experience of the first customer (Customer A)
• Customer B’s influence on the experience of Customer A
can be active or passive and either positive or negative
Servuction system
INVISIBLE ORGANISATION AND SYSTEMS:
• Visible components of service firms have to be
complemented with invisible components
• The invisible components reflect the rules,
regulations and processes of the organisation
• Though invisible, they have a great impact on
the customers experience
Service as a
system
• System where input-
processing-output
• Part that is invisible
known as technical core
• Contact point not only
during the delivery of the
product but also in other
situations
Service as a system
• Two levels of customer contact i.e. delivery of the core
product and peripheral level that surround the core product
• Peripheral or supplementary could be: information,
consultation, order-taking, hospitality, care taking,
exceptions, billing, payment
• Different in small and large business
• Performance of low level employees rather than high level
employees is key in the moment of truth so they needs to be
recruited, trained and motivated properly.
The nature of service and customer employee
contact
• Continuum of high contact to low contact depending on the
physical presence of the customer within service system
• Both front line workers and back stage workers
• Different from the manufacturing as service contact
personnel engage in three way interaction i.e. between
themselves, customers and relevant production process or
technology.
• Traditionally- face to face interaction-modern through the
use of Information and communication technology(ICT)
 High contact service encounter
• On the basis of human interaction: what is being processed
and the whether the nature of this processes is tangible or
intangible
• Two categories of things are processed in service i.e. people
and object
• In some customer themselves are the service input like in
transportation and education and in some key input is the
object like computer or radio that needs to be repaired.
• In case of process sometimes tangible process takes place
where as in information based service process can be intangible
• As per operational
perspective four
groups
People as part of the product
• The more involved customer become in the service delivery process the
more they tend to encounter service personnel
• Customer contact personnel have Operational as well as marketing
responsibility
• Server cannot be separated from the service
• The customer comes second, the company's first focus should be on
employees
• Some characteristics of high contact employees: inter-personnel skill,
appearance, selling capabilities and working with consumers and also
reading the no-verbal cues
Job design and recruitment
• The process of job design has been defined as,
“...specification of the contents, methods, and
relationships of jobs in order to satisfy technological
and organizational requirements as well as the social
and personal requirements of the job holder.”
(Buchanan, 1979)
• Attempt to organize task duties and responsibility into
a unit of work to achieve certain objectives
Aspects of Job Design
Work Organization
Rearranging or replacing work (e.g. automating, teaming, work groups, division of
labor)
Giving the worker additional responsibility/tasks (job enlargement)
Job rotation
Job Structuring
Giving responsibility for different types/levels of work (job enrichment)
Granting control over work (autonomy)
Self-Organization (time/process management)
Location/Scheduling
Telecommuting (part or full off-site work)
Alternative scheduling (4 day work week, flextime, etc.)
Virtual Office/Virtual Organization
Recruiting the right people for the job
• Need prior qualification
• Different position in same organization are filled by
the people with different styles and personality
• Recruitment should reflect the human dimension as
well as the technical criteria
Who must be hired vs what can be taught
• Some qualities can be taught while some cannot be taught that
comes intrinsically
• What are the quality that can be taught?????
 Service jobs and relationship
• Exchange relationship with the customers which holds true
between the employee and the organization
• Evaluation of he cost and the benefit in the organization
• Benefits are……
• Costs are…..
• Front stage jobs add another dimension i.e. frequent customer
contact which may be seen as the benefit or as the cost depending
upon the personality of the character
• HR should ask the employees about their requirement and
provide better working environment to reduce the negative aspect
of the job redesign
Employee relationship and customer
relationship
• Strong correlation between employees attitude and
perception of service quality among customers of the
same organization
• Turnover probability is low where customer
dissatisfaction is low where there is better working
environment
• High employee turnover results in cycle of failures
• So retain employees as it affects the retention of the
customers
Cycles of Failure,
Mediocrity, and
Success
Cycle of Failure
Customer
turnover Repeat emphasis on
attracting new customers

Failure to develop
customer loyalty
Low profit
margins Narrow design of
jobs to accommodate
low skill level
High employee turnover;
poor service quality

No continuity in Use of technology Emphasis on

relationship for to control quality rules rather
customer Employee dissatisfaction; than service
poor service attitude
Payment of
low wages

Employees
become bored Minimization of
Customer selection effort
dissatisfaction Minimization
of training
Employees can’t
respond to customer
problems

Source: Schlesinger and Heskett

Cycle of Failure
•The employee cycle of failure
• Narrow job design for low skill levels
• Emphasis on rules rather than service
• Use of technology to control quality
• Question: Labor Cost and Labor Rate
• Bored employees lacking the ability to respond to the
customer problems
• Dissatisfied with poor service attitude
• Low service quality
• High employee turnover
 Cycle of Failure
• The customer cycle of failure
• Repeated emphasis on attracting new customers
• Customers dissatisfied with employee performance
• Customer always served by new faces
• Fast customer turnover
• Ongoing search for new customer to maintain sales
volume
• Managers’ short-sighted assumptions about financial
implications of low pay/high turnover human resource
strategies
• Managers fail to recognize the cost of constant recruiting,
hiring and training (which is as much a time cost for
managers as a financial cost), the lower productivity of
inexperienced new workers, and the costs of constantly
attracting new customers (requiring extensive adver­tising
and promotional discounts).
Cycle of Failure
• Costs of short-sighted policies are ignored
• Loss of expertise among departing employees*
• Disruption to service from unfilled jobs
• Constant expense of recruiting, hiring, training*
• Lower productivity of inexperienced new workers
• Loss of revenue stream from dissatisfied customers who go elsewhere*
• Loss of potential customers who are turned off by negative word-of-
mouth
• Higher costs of winning new customers to replace those lost—more need
for advertising and promotional discounts
Cycle Of Mediocrity
Customers trade
horror stories
Other suppliers (if any)
seen as equally poor

Employees spend
working life
in environment
Employee of mediocrity
dissatisfaction
(but can’t easily quit) Emphasis
on rules
Narrow design vs. pleasing
of jobs
customers
No incentive for Complaints met by
cooperative relationship Training emphasizes
indifference or Success =
to obtain better service hostility learning rules
not making
mistakes
Service not focused
Jobs are boring and on customers’ needs
repetitive; employees
unresponsive Good wages/benefits
high job security
Resentment at inflexibility and
lack of employee initiative; Promotion
and pay
complaints to employees increases based Initiative is
discouraged
on longevity,
lack of mistakes
Source: Heskett and Schlesinger
Customer dissatisfaction
 Cycle Of Mediocrity
• Most commonly found in large, bureaucratic organizations
• Service delivery is oriented toward
• Standardized service
• Operational efficiencies
• Prevention of employee fraud and favoritism toward specific
customers
• Job responsibilities narrowly and unimaginatively defined
• Successful performance measured by absence of mistakes
• Training focuses on learning rules and technical aspects of job—not
on improving interactions with customers and co-workers
Cycle Of Mediocrity
• Customers find the organization frustrating to deal
with
• Little incentive for customers to cooperate with
organization to achieve better service
• Complaints are often made to already unhappy
employees
• Customers stay because of lack of choice
Cycle of Success
Low
customer
turnover Repeat emphasis on
customer loyalty and
retention

Customer
loyalty
Higher
profit
margins
Broadened
Lowered turnover, job designs
high service quality

Continuity in
relationship with Train, empower frontline
customer Employee satisfaction, personnel to control quality
positive service attitude

Above average
Extensive wages
training
High customer Intensified
satisfaction selection effort

Source: Heskett and Schlesinger

 Cycle of Success
• Longer-term view of financial performance; firm
seeks to prosper by investing in people
• Attractive compensation packages attract better
job applicants
• More focused recruitment, intensive training,
and higher wages make it more likely that
employees are:
• Happier in their work
• Provide higher quality, customer-pleasing service
 Cycle of Success
• Broadened job descriptions with empowerment
practices enable frontline staff to control quality
and facilitate service recovery
• Regular customers more likely to remain loyal
because:
• Appreciate continuity in service relationships
• Have higher satisfaction due to higher quality
Production line vs Empowerment approach
to managing employees
 Production line approach to service
how service operations can be made more efficient by
applying the logic and tactics of manufacturing.
• Simplification of tasks,
• clear division of labor,
• substitution of equipment and systems for employees,
and
• little decision-making discretion afforded to employees;
in short, management designs the system and
employees execute it.
• Product line is based on the control model of organization design and
management with clearly defined roles, top down control system
hierarchical pyramid structure and assumption that management knows
best. The features mentioned below are concentrated at the top of the
organization
1. Power to influence work procedures and organizational direction (e.g.,
quality circles, self-managing teams)
2. Information about operating results and measures of competitive
performance
3. Rewards based on organizational performance (e.g., bonuses, profit
sharing, stock ownership)
4. Knowledge/skills that enable employees to understand and contribute
to organizational performance
 Production line approach
example(McDonald)
• Workers are taught how to greet customers, and ask for their order (including
a script for suggesting additional items).
• There is then a set procedure for assembling the order (for example, cold
drinks first, then hot ones), placing various items on the tray, and placing the
tray where the customers need not reach for it.
• Next, there is a script and a procedure for collecting money and giving
change.
• Finally, there is a script for saying thank you and asking the customer to come
again.
• This production-line approach gives the organization control over, and
uniformity of, the customer-server interaction. It is easily learned, so workers
can be quickly trained and put to work.
Employee empowerment approach
Employee empowerment
• A management practice of sharing information, rewards, and
power with employees so that they can take initiative and
make decisions to solve problems and improve service and
performance.
• Empowerment is based on the idea that giving employees
skills, resources, authority, opportunity, motivation, as well
holding them responsible and accountable for outcomes of
their actions, will contribute to their competence and
satisfaction.
 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
• Empowerment approach is based upon the involvement
model in which the features are pushed down through
the organization
1. Power to influence work procedures and organizational
direction (e.g., quality circles, self-managing teams)
2. Information about operating results and measures of
competitive performance
3. Rewards based on organizational performance (e.g.,
bonuses, profit sharing, stock ownership)
4. Knowledge/skills that enable employees to understand and
contribute to organizational performance
Levels of Employee Involvement
• Suggestion involvement
• Employee make recommendation through formalized
programs
• Job involvement
• Jobs redesigned
• Employees retrained, supervisors reoriented to
facilitate performance
• High involvement
• Information is shared
• Employees skilled in teamwork, problem solving etc.
• Participate in management decisions
• Profit sharing and stock ownership
 Why empowerment???
• Quicker online response to customer needs at the point of
service delivery
• Employee fell good about their job and themselves
• Employees will interact with customer with more warmth and
enthusiasm
• Empowered employees can be the source if idea on how to
serve the customers
• Great word of mouth advertising and customer retention
Cost associated with empowerment
• A great amount of investment in selection and
training
• Slower or inconsistent service delivery
• Employees may give away the store or simply
make bad decision like leaving the work to
satisfy the customer
The role of union in HRM
• A group of workers joined together in a specific type
of organization for the purpose of improving their
working conditions as well as to help in promoting the
common interests of the group
Human resource management in multicultural
context
• Result of globalization
• Organizations need employees who understand the
customers and suppliers in foreign countries.
• Organizations need to understand the laws and customs that
apply to employees in other countries
 Employees in an International Workforce

• Parent-country national – employee who was

born and works in the country in which an
organization’s headquarters is located.
• Host-country national – employee who is a
citizen of the country (other than parent
country) in which an organization operates a
facility.
• Third-country national – employee who is a
citizen of a country that is neither the parent
country nor the host country of the employer.
• Human resources management in international
corporations in various types of cultural relations
between the headquarters of the corporation and its
overseas subsidiaries
• Ethnocentric, polycentric, regiocentric and geocentric
Factors Affecting HRM in
International Markets

Economic
Education
Systems

Political-
Culture Legal
Global Systems
HRM
 Culture
• Culture – a community’s set of shared assumptions
about how the world works and what ideals are
worth striving for.
• Culture can greatly affect a country’s laws.
• Culture influences what people value, so it affects
people’s economic systems and efforts to invest in
education.
• Culture often determines the effectiveness of
various HRM practices.
 Culture (continued)
• Cultural characteristics influence the ways
members of an organization behave toward one
another as well as their attitudes toward various
HRM practices.
• Cultures strongly influence the appropriateness of
HRM practices.
• Cultural differences can affect how people
communicate and how they coordinate their
activities.
 Hofstede’s Five Dimensions of Culture
1. Individualism/Collectivism
2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Long-term/Short-term
Orientation
Describes the strength of the relation between
an individual and other individuals in the
society.
Concerns the way the culture deals with
unequal distribution of power and defines the
amount of inequality that is normal.
Describes how cultures handle the fact that the
future is unpredictable.
The emphasis a culture places on practices or
qualities that have traditionally been considered
masculine or feminine.
Suggests whether the focus of cultural values is
on the future (long term) or the past and
present (short term).
 In Taiwan, a country that is high in
collectivism, coworkers consider
themselves more as group members
instead of individuals.