service quality and service productivity management practices

NORTH- HOLLAND

Service Quality and Service Productivity

Management Practices Pierre Filiatrault

Jean Harvey Jean-Charles Chebat

This article reports the results of empirical research on service quality and service productivity management practices. The

objective of the research is to gain a better understanding of these practices through a comparative analysis of large and small businesses, offirms delivering services to organizations and to con-

sumers, and of unionized and nonunionized firms. A second objective is to correlate these practices to two performance variables:financial results and perceived customer satisfaction. The most frequent practices have been identified. Various quality practices are associated with customer satisfaction but not

with financial results. Productivity practices are less popular than

Address correspondence to Dr. Pierre Filiatrault, Department of Marketing, University of Qu6bec at Montrdal, Case Postale 6192, Succursale Centre-Ville,

Montr6al PQ H3C 4R2, Canada. The authors are indebted to the Social Sciences and Humanities Research Coun-

cil of Canada for the grant that made this research possible.

quality practices, but some are related to both financial results and customer satisfaction. An important problem is that quality

has been defined and redefined in many ways that often embody elements of productivity.

INTRODUCTION

This is an article about the practices of service quality and service productivity. According to Thomas J. Peters, marketing is 5 % conceptual and 95 % day-to-day execu- tion [26]. The same can be said about service quality and productivity.

The marketing of services is now recognized and legiti- mized as an academic field in its own right [15]. The specific contributing and inhibiting forces influencing the creation, dissemination, and utilization of knowledge on services marketing have been identified [7]. In the last decade, much

Industrial Marketing Management 25, 243-255 (1996) © Elsevier Science Inc., 1996 655 Avenue of the Americas, New York, NY 10010

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The management of quality cannot be separated from the management

of productivity.

attention has been paid by marketing researchers to service quality. An extensive review of the literature [7, 22] has revealed that two approaches have kindled research on service quality: the European approach [16-18] and the American approach [24, 25]. Other authors [4-6, 19, 20, 30-32] have looked into the managerial aspects of quality.

The productivity of services, on the other hand, has received much less attention. Productivity is defined as a ra- tio of outputs to inputs. Although this concept appears to be quite simple, the measurement of productivity is rela- tively complex [29]; the productivity of labor is the most common measure used [3] and may be particularly well suited to a service environment, though extensive invest- ments in information technology in some sectors such as banking require a broader measure.

In the delivery of services, the management of quality cannot be separated from the management of productivity, and, contrary to traditional assumptions there does not need be a trade-off between quality and productivity. In fact, they are complementary [23]. Mefford points out that joint quality and productivity improvement programs, such as just- in-time (JIT), total quality management (TQM), and work teams that have been developed successfully by manufacturing firms, appear to have the potential to produce similar benefits in service industries. In fact, the evolving bound-

ary between manufacturing and services is a fertile ground for new paradigms [27]. Productivity and quality improvement is most effective when it is carried out in a balanced manner to include managerial, behavioral, and technical initiatives [33]. There is a close relation between service quality, productivity, and customer satisfaction, and improving productivity can even improve customer satisfaction [8]. However, even if the meaning of service quality and service productivity is not yet very clear to most managers, there is even more confusion on the meaning of customer service [14]. But how do managers translate service quality and productivity concepts into managerial practices?

METHODOLOGY

Many publications on service productivity are norma- tive, for instance Drucker [13]. There is much less empirical research on service productivity than on service quality (Roach [28] is a good example of what is needed). The relative lack of research on service productivity, whether it be a cause or an effect, is linked to the fact that the conceptual domain of productivity in services is not as developed as the conceptual domain of service quality. Thus, there is a need for more research on service productivity.

PIERRE FILIATRAULT is Professor of Marketing and Head of the Department of Marketing at the School of Management, University of Qu6bec at Montreal, Montreal, Canada.

JEAN HARVEY is Professor of Operations Management at the School of Management, University of Quebec at Montreal, Montreal, Canada.

JEAN-CHARLES CHEBAT is the John-Labatt Marketing Professor at the School of Management, University of Quebec at Montreal, Montreal, Canada.

Research Variables

Service quality and productivity vary directly with one another. Quality is not achieved at the expense of lost productivity; productivity gains need not affect quality adversely [21]. The model underlying the selection of quality practices is a three-phase model: preparation, deployment, and continuity. Service quality management implies the design, production, and measurement of quality [12]. The three phases can be summarized as follows: (1) creation of awareness and start-up, (2) coordination of activities,

244

In the last decade, the focus of research has been on the measurement not

management of quality.

and (3) continuation of quality improvement [34]. With regard to productivity, many different approaches have been used to improve it: work study, self-determination and matching approach and task [21]. To increase productivity, managers resort to managing input resources (raw mate- rial, for instance) and human resources (use of part-time personnel, subcontracting); to empowering the customer by automating, and the service provider by informating [21]; and, finally, to investing in more efficient equipment and to influencing demand to smooth out peaks and troughs. Quality and productivity practices were accordingly selected as independent variables.

A related issue of interest is the relation between various management practices and performance. For many years, data have been collected in the profit impact of market strategy (PIMS) program in order to identify the most important variables (market share, marketing mix, quality, costs, and others) affecting profits. Some authors have also looked into the variables affecting the successful de- velopment of new services [9-11[. Other authors have even looked into the economic consequences of quality, productivity, and customer satisfaction [1, 2]. However, none of these studies has looked into quality and productivity practices.

For the first part of the analysis, three classification variables are used as dependent variables: business size, customer type, and unionization. The first two variables have been selected because they address substantive domains of interest in the literature: small businesses versus large businesses, consumers versus organizations. The third, unionization, was chosen for its pertinence with regard to both quality and productivity. For the second part of the analysis, two performance measures were used as dependent variables: financial results and perceived customer satisfaction. Financial results are a well-accepted objective performance metric, and customer satisfaction has long been recognized in marketing as a central concept and as an important goal of business activity [1].

Research Objectives and Data Collection Procedure

The general objective of the present exploratory research is to get out of the realm of thought into the down-to-earth realm of action. The specific objectives are to gain a better understanding of general service quality and productivity management practices by making a thorough comparative analysis of large and small businesses, of firms delivering services to organizations and to consumers, and of unionized and nonunionized firms, and by correlating these practices to performance measures. The research questions are: what are the most current quality and productivity practices? Does the use vary according to the substantive domain? Which of these practices have an impact on the performance of firms?

In order to gain a better understanding of quality and productivity management practices, eight in-depth interviews were first carried out. After the interviews, a questionnaire was prepared and tested. Required corrections were made. The questionnaire was composed of five blocks of questions. In the first block, respondents were asked to describe their firms (sector of activity, number of employees, etc.). Managers were asked to describe the characteristics of their services in the second block. Manage- ment practices for service quality, service productivity, and customer service were probed in the third block. Opin- ions on these subjects were requested from respondents in the fourth block. Finally, the fifth block focused on the so- ciodemographic characteristics of respondents.

The sample frame for this research consisted of firms located in Quebec, Canada and listed by Dun and Brad- street. A proportional random sampling procedure (in ac- cordances with Statistics Canada's definition of activity groups) was used to select 3,001 firms. A letter explaining the purpose of the research was forwarded to respondents 1 week before the questionnaire was mailed. Two follow- up letters were mailed 1 week apart after the mailing of

245

Investing in more efficient equipment has a significant impact on both financial results

and customer satisfaction.

the questionnaire. A total of 589 questionnaires were returned, for a response rate of 20.3 % ; 545 questionnaires were judged to be usable, for a net response rate of 18.8 %. The sample is representative as responses were received from all activity groups. The responses from transport and communications, finance, business services, and hospitality groups are proportional to the population; retailing and wholesaling are both somewhat underrepresented, and social and medical services are overrepresented. Twenty calls were made to firms that did not answer the questionnaire. No systematic differences were detected.

RESULTS

The proficiency ratings of service quality and productivity management practices are first presented, followed by an analysis of the relations between these variables and performance. Service quality and productivity management practices are analyzed by size of business (small and large firms), type of customers (consumers and organizations/ firms), and status of employees (unionized or not). Finally, the impact of the quality and productivity management practices on financial results and perceived customer satisfaction is analyzed.

Service Quality Management Practices

In the last decade, service quality has been the subject of much research and numerous publications, the focus being mainly on the measurement of quality. Much less has been written on the management practices of service quality. Respondents recognize that service quality depends on all employees (9.26 on a 1 to 10 scale) and that it is essen- tial to financial success (9.07). The perceived importance of service quality for the financial success of the firm is more evident in small businesses (9.24 versus 8.46 for large businesses; level of significance = .001), in businesses that cater to other firms or organizations (9.24 versus 8.46 for businesses that cater to consumers; level of significance =

.001), and in nonunionized firms (9.39 versus 8.20 for unionized firms; level of significance = .001). In the present research, 22 quality management practices are analyzed with respect to the size of business, the type of customers, and the status of employees. Respondents were invited to evaluate how the statement described the management practices with regard to the most important service offered by their firm. Results are presented in Table 1. The four most frequent service quality management practices are: activities to maintain or improve company image, top management involvement in quality management, effort to improve relations with customers, and employee participation in quality programs. The least frequent activities are surveys on service quality and quality circles.

SIZE OF BUSINESS. Firms were divided into three groups by size: small businesses (up to 99 employees), medium- sized businesses (99 to 499 employees), and large businesses (500 employees or more), for a total of 545 firms. The results were obtained from a one-way analysis of variance between small businesses (252 firms) and large businesses (78 firms).

There are only six statements that best describe service quality management practices that are statistically different (Table 2). Top management is more involved in quality management in small businesses (8.78 versus 8.17; level of significance = .01), and appearance of physical surroundings is given more importance in small businesses (8.27 versus 7.4 l; level of significance = .05). In small businesses, there are more often programs to ensure that support personnel have a better understanding of their role (8.14 versus 7.62; level of significance = .05), and customers are better informed of their importance to the firm (8.00 versus 7.41; level of significance = .05).

On the other hand, large firms have implemented operational quality circles more frequently (8.26 versus 5.67; level of significance = .01) and carry out surveys on service quality more regularly (6.61 versus 5.56; level of significance = .01).

246

Customer satisfaction increases when management is involved and objectives are

clearly defined.

TYPE OF CUSTOMERS. Respondents were questioned with regard to customer type: their firms cater to consumers (n = 244) , to firms and organizations (n = 124), and to both types o f customers (n = 177). Considering our re-

search objectives, a one-way analysis o f variance was carried out between finns whose customers were strictly consumers or strictly businesses.

Firms whose customers are consumers use more service

TABLE 1 Proficiency Ratings of Quality Management Practices

1 2 3 4 5 6 7 8 9 10

Activities to maintain or improve company image

Top management implication in quality management

Effort to improve relations with customers

Employee participation in quality program

Improvements to support services Physical surroundings appearance given

more importance Regular analysis of customer complaints Program to increase support personnel

comprehension of its role Build-up of customer-oriented

work team Activities to enhance customer loyalty Activities to identify errors and their

causes Customers informed of their

importance to the firm Quality objectives clearly defined Effort to maintain good relations

with employees Quality control procedures Program to increase remarkably

quality in medium-term Customers often informed of firm

quality preoccupation Contact personnel made conscious of

its importance Quality training programs Customers encouraged to increase

quality of their participation Surveys on service quality carried

out regularly Operational quality circles

9.11

8.64

8.33

8.33 8.13

8.11 8.06

8.06

8.00 7.93

7.81

7.71 7.64

7.57 7.53

7.44

7.09

6.93 6,69

6.41

5.91 5.90

Note: Scale conversion from 1- to 7-point scale to a 1- to 10-point scale.

247

Managers should realize the importance of clearly defined quality objectives.

TABLE 2 Impact of Firm Size on Proficiency Ratings of Quality Management Practices

1 2 3 4 5 6 7 8 9 10

Small I 8.78 Top management implication in quality management Lari}e

Physical surroundings appearance Small given more importance Large

Program to increase support personnel Small comprehension of its role Large

Customers informed of their Small importance to the firm Large

Operational quality circles Small Large

Surveys on service quality carried Small out regularly Large

] 8.17

I 8.27

I 5.67

P = 0.01

[ 5.56

I 6.61

I 7.41 P = 0.05

] 8.14 I 7.62 P = 0.05

) 8.00 I 7.41 P = 0.05

] 8.26 P = 0.01

P = 0.01

Note: Scale conversion from 1- to 7-point scale to a I- to 10-point scale.

TABLE 3 Impact of Customer Type on Proficiency Ratings of Quality Management Practices

2 3 4 5 6 7 8 9 10

Consumers I 8.61 Regular analysis of customer complaints

Activities to enhance customer loyalty

Appearance of physical surroundings given more importance

Effort to maintain good relations with employees

Quality training programs

Surveys on service quality carried out regularly

Organizations

Consumers

7.49

I 7.51 Orsanizations

Consumers

I 8.31

] 8.29 Organizations

Consumers

] 7,80

[ 7.90 Organizations

Consumers

Organizations J 6.36

Consumers I 6.10

Organizations I 5.29

I 7.11

] 7.01

P = 0.001

P = 0.01

P = 0.05

P = 0.05

P = 0.05

P = 0.05

Note: Scale conversion from 1- to 7-point scale to a 1- to 10-point scale.

248

Quality has been defined in ways that often embody elements of productivity.

quality practices associated with external marketing management practices (Table 3). They more often regularly analyze customers complaints (8.61 versus 7.49; level of significance = .001) and carry out regular surveys on service quality (6.10 versus 5.29; level of significance = .05). There are also other practices related to internal marketing: more frequently, efforts are made to maintain good relations with employees (7.90 versus 7.11; level of significance = .05) and quality training programs are used (7.01 versus 6.36; level of significance = .05). And not sur- prisingly, the appearance of physical surroundings is given much more importance in firms whose customers are consumers than in those whose customers are businesses (8.29 versus 7.80; level of significance = .05). When businesses cater to other businesses, they perform more activities to enhance customer loyalty (8.31 versus 7.51; level of significance = .01). Although the difference is not statistically significant, these finns are more often of the opinion that they have the ability to identify errors and their causes.

STATUS OF EMPLOYEES. Respondents were asked if their employees were totally, partially, or not unionized: 170 firms were totally unionized, 141 partially, and 221 were not unionized. A one-way analysis of variance was carried out between firms that were totally unionized and those that were not.

There are some statistical differences in the evaluation of the statements that describe service quality practices between unionized and nonunionized employees (Table 4). Firms without a union have more activities to enhance customer loyalty value (8.41 versus 7.23; level of significance = .001), they make more efforts to identify errors and their causes (7.90 versus 7.53; level of significance -- .05), and their contact personnel is more often made aware of their importance (7.30 versus 6.50; level of significance -- .01). Firms with a union have more activities to maintain or improve company image (8.99 versus 7.90; level of significance = .05), they analyze customer complaints more regularly (8.44 versus 7.84; level of significance --

TABLE 4 Impact of Empioyee Status on Proficiency Ratings of Quality Management Practices

1 2 3 4 5 6 7 8 9 10

Unionized ] 8.99 Activities to maintain or improve company image Nonunionized [ 7.90

Regular analysis of customer Unionized ] 8.44

complaints Nonunionized ] 7.84

Activities to enhance customer loyalty

Activities to identify errors and their causes

Contact personnel made conscious of its importance

Customers encouraged to increase quality of their participation

Unionized ] 7.23

Nonunionized [ 8.41

Unionized [ 7.90

Nonunionized ] 7.53

Unionized ] 6.50

Nonunionized I 7.30

Unionized [ 6.91

Nonunionized ] 6.14

P = 0.05

P = 0.01

P = 0.001

P = 0.05

P = 0.01

P = 0.01

Note: Scale conversion from 1- to 7-point scale to a I- to 10-point scale.

249

.01), and their customers are encouraged to increase the quality of their participation (6.91 versus 6.14 level of significance = .01).

Service Productivity Management Practices

Service productivity practices also vary greatly among the various types of firms. Twelve management practices are investigated with regard to size of business, type of customers, and status of employees. The most frequent service productivity management practices are: selection of best possible suppliers, investment in more efficient equipment, grouping of similar tasks, and effort to make each operation/transaction profitable. Results are presented in Table 5. The method of analysis is similar to the one used for quality practices.

SIZE OF BUSINESS. Small businesses pay more attention to the profitability of each operation/transaction, although the difference is not statistically different. Invest- ing in more efficient equipment is carried out in both types of firms almost equally. However, as show in Table 6, grouping of similar tasks is carried out more often in large businesses (8.17 versus 7.17; level of significance = .05). Hir- ing part-time personnel is also carried out more often in large businesses (7.34 versus 5.91; level of significance = .O01), as well as automation of certain tasks (6.71 versus 5.94; level of significance = .05).

Small businesses are more likely to have a program to improve productivity in the medium-term (7.00 versus 6.23:

level of significance = .05) and they make more efforts to facilitate customer participation (6.44 versus 5.53; level of significance = .05). Although not that frequently, small businesses influence customer behavior to reduce irregularities of demand (4.69 versus 3.87; level of significance = .05). Finally, the least popular practice for both types of firms is the use of subcontracting, This is a fairly surprising observation in an era where companies should be focus- ing on their core competencies and outsourcing any task or activity at which they are not "best in the world" [27].

TYPE OF CUSTOMERS. The selection of the best possible suppliers is the statement that best describes the service productivity practices in both types (consumers or organizations) of firms. Firms whose customers are consumers (Table 7) modify demand more often through price changes (7.64 versus 6.99; level of significance = .05) and more often hire part-time personnel (6.80 versus 5.66; level of significance = .001). However in the business-to-business market, the profitability of each operation/transaction is more important (7.89 versus 6.99; level of significance = .001); these firms also have more interest in improving productivity in the medium-term with productivity programs (7.06 versus 6.56; level of significance = .01) and in automating certain tasks (6.54 versus 5.90; level of significance = .05). Finally, the least important practice, the use of subcontractors, is more prevalent (3.94 versus 2.84; level of significance = .001) in business-to-business markets.

STATUS OF EMPLOYEES. In firms whose employees do

TABLE 5 Proficiency Ratings of Productivity Management Practices

1 2 3 4 5 6 7 8 9 10

Selection of best possible suppliers Investment in more efficient equipment Similar tasks grouped together Effort to make each operation/transaction

profitable Modification of demand through price

changes Program to improve productivity in

medium-term Services computerized as much as

possible Hiring of part-time personnel Customer participation facilitated Automation of certain tasks Influence on customer behavior to reduce

irregularities of demand Use of subcontracting I 3.23

4.43

7.64

7.61

7.19

6.72

6.63 6.47

6.11 6.09

8.81 8.20

Note: Scale conversion from I- to 7-point scale to a 1- to 10-point scale.

250

Productivity programs are often couched in quality parlance.

TABLE 6 Impact of Firm Size on Proficiency Ratings of Productivity Management Practices

1 2 3 4 5 6 7 8 9 10

Similar tasks grouped together [ Small ] 7.17

Programs to improve productivity in medium-term

Automation of certain tasks

Hiring of part-time personnel

Customer participation facilitated

Influence on customer behavior to reduce irregularities of demand

Large I 8.17

Small [ 7.00

[ Larse [ 6.23

[Small ] 5.91 I Large

I Small 15.94 [ Large ] 6.71

Small ] 6.44 Large

Small

Lar~ge I 3.87 ] 4.69

] 5.53

P = 0.05

P = 0.05

I 7.34 P = 0.001

P = 0.05

P = 0.05

P = 0.01

Note: Scale conversion from I- to 7-point scale to a 1- to 10-point scale.

TABLE 7 Impact of Customer Type on Proficiency Ratings of Productivity Management Practices

1 2 3 4 5 6 7 8 9 10

[ Consumers ] 6.99 Effort to make each operation/ transaction profitable { Organizations ] 7.89

Modification of demand through [ Consumers [ 7.64 price changes [ Organizations ] 6.99

Program to improve productivity in [ Consumers I 6.56 medium-term [ Or~;anizations ] 7.06

Hiring of part-time personnel


Consumers ] 6.80

Use of subcontracting

Organizations I 5.66

Consumers [ 5.90

Organizations ] 6.54

Consumers ] 2.84 Organizations ] 3.94

P = 0.001

P = 0.05

P = 0.01

P = 0.001

P = 0.05

P = 0.001

Note: Scale conversion from I- to 7-point scale to a I- to 10-point scale.

251

not belong to a union, respondents' degree of approval with statements that describe their firms' productivity practices is significantly higher (Table 8). These firms believe more in investing in more efficient equipment (8.57 versus 7.67; level of significance = .001) and in the profitability of each operation/transaction (8.04 versus 6.57; level of significance = .001). They plan more often to improve productivity in the medium term (7.04 versus 6.53; level of significance = .01). They computerize as much as possible (6.87 versus 6.13; level of significance = .01), automate certain tasks (6.47 versus 5.40; level of significance = .001), and facilitate the participation of customers (6.43 versus 5.37; level of significance = .001). When employees are unionized, firms more frequently modify demand through price changes (8.01 versus 7.06; level of significance = .001).

Impact on Performance of Firms

The impact of the various quality and productivity practices was investigated on two performance indices: financial results and perceived customer satisfaction. Regres- sion analyses were carried ou t - the dependent variables being the performance indices and the independent variables being successively quality and productivity practices.

Tables 9 and 10 contain the coefficients resulting from

the regression models. The results of the regression analyses of customer satisfaction as a function of quality practices show R ~' = .4360 (Table 9), that is to say that this equation explains 43.6 % of the variance. Customer satisfaction increases, particularly when management is involved and when objectives are clearly defined. The regression model of financial results as a function of quality practices was not significant, although there is a correlation of 0.3317 between financial results and perceived customer satisfaction.

Two productivity practices, however, are related to financial results: computerization and investing in more efficient equipment. Investing in more efficient equipment has an important and significant impact on both financial results and customer satisfaction (Table 10). However, better results are achieved when firms do not rely on subcontracting. The regression equation for financial results explains 21% of the variance, whereas the one on customer satisfaction explains 16% of the variance.

CONCLUSION AND MANAGERIAL IMPLICATIONS

The objectives of this research were to gain a better understanding of service quality and productivity manage-

TABLE 8 Impact of Employee Status on Proficiency Ratings of Productivity Management Practices

1 2 3 4 5 6 7 8 9 10

Unionized ] 7.67 Investment in more efficient equipment Nonunionized

Modification of demand through price changes

Effort to make each operation/ transaction profitable

Program to improve productivity in medium-term

Service computerized as much as Ix)ssible


Customer participation facilitated

J 8.57

Unionized

Nonunionized { 7.06

Unionized I 6.57

Nonunionized

I 8.01

I 8.04

Unionized I 6.53

Nonunionized I 7.04

Unionized [ 6.13

Nonunionized ] 6.87

Unionized I 5.40

Nonunionized I 6.47

Unionized ] 5.37

Nonunionized I 6.43

P = 0.001

P = 0.001

P = 0.001

P = 0.01

P = 0.01

P = O.OOl

P = 0.001

Note: Scale conversion from 1- to 7-point scale to a l- to 10-point scale.

252

TABLE 9 Impact of Ouelity Practices on Customer Satisfaction

Standardized Independent Variables Beta t-Value Significance

Quality control procedures Good relations with employees

Top management involvement

Contact personnel aware of their importance

Quality objectives clearly defined

Customers informed of their importance to the firm Effort to improve relations with customers Surveys on service quality carried out regularly

R-' = .4360; F = 11.0150: Sig. F = 0.000(3.

- 0 . 1 7 3 3 -2 .021 0.0456 0.1917 2.342 0.0209

0.2447 3.085 0.0026

0.2056 2.546 0.0122

0.2297 2.334 0.0213 0.1951 2.426 0.0168

0.1651 1.962 0.0522 - 0 . 1 9 9 9 - 2 . 2 3 9 0.0271

ment practices through a comparative analysis with respect to the size of businesses, the types of customers and the status of employees, and to investigate the impact of these practices on two performance variables: financial results and perceived customer satisfaction.

Image improvement or maintenance, top management involvement, good relations with customers, and employee participation are the most frequent means used to actual- ize service quality management. Small businesses pay more attention to top management and support personnel involvement; large businesses use more traditional practices (surveys and quality circles). Firms whose customers are consumers use significantly more quality management practices than firms whose customers are organizations. The latter pay more attention to customer loyalty. Finally, firms whose employees are not unionized are more frequent users of activities to enhance loyalty and to make contact personnel conscious of its importance; however, unionized firms pay more attention to customer complaints and company image.

The most frequent service quality management practice is image improvement or maintenance activities, and this has no significant impact on customer satisfaction. How- ever, two important influences on customer satisfaction (clearly defined quality objectives and good relations with employees) are not used that frequently. Managers should realize the importance of clearly defined quality objectives and of good relations with employees to improve customer satisfaction.

With regard to productivity management practices, large firms use recognized productivity practices more often (task grouping, automation, and hiring of part-time personnel), whereas small businesses pay more attention to medium- term programs, customer participation and influence on customer behavior. There is slightly more emphasis on productivity in firms that cater to other businesses than in those who do business with consumers. The latter hire part-time personnel more often and cope with demand fluc- tuations by changing prices; the former put more effort into automating, subcontracting, and developing productivity

TABLE 10 Impact of Productivity Practices on Customer Satisfaction and on Financial Results

Standardized Independent Variables Beta t-Value Significance

Customer satisfaction:* Use of subcontracting

Investment in more efficient equipment

Financial results: *

Use of subcontracting

Services computerized Investment in more efficient equipment

- 0 . 3 2 3 0 -3 .241 0.0017

2.564 2.564 0.0122

- 0 . 2 3 9 0 - 2 . 3 9 1 0.0192 0.2338 2.171 0.0329 0.2491 2.316 0.0231

* R 2 = 0.1600; F = 7,8076; Sig. F = 0.0008. ; R 2 = 0.2143; F = 7.1831; Sig. F = 0.0003.

253

improvement programs for the medium-term, and focus more on the profitability of each transaction. Finally, most of the effort in terms of productivity is expended in firms where employees are not unionized.

The most frequent productivity practice, selection of the best possible suppliers, has no effect on financial results and perceived customer satisfaction. The second most important (investing in more efficient equipment) has a notice- able impact on both. And subcontracting, which is not frequently used, has a negative impact on the two performance variables.

The results of this descriptive research on quality and productivity management practices are interesting from an empirical point of view. The most frequent practices have been identified, as well as those that have an impact on financial results and customer satisfaction. Results show that small service firms and service firms dealing with consumers appear to be somewhat more involved in the use of quality management practices than large firms and firms dealing with other businesses. Small and large firms show a comparable interest in productivity management practices. However, businesses dealing with other businesses somewhat, and especially firms whose employees are not unionized, show more interest in productivity. Thus, firms dealing with consumers are more involved in quality, firms dealing with other firms, and especially firms whose employees are not unionized are more involved in productivity.

Managers in small firms could look more into the use of traditional quality tools, whereas it could be of interest to top management of large firms to get more involved in the management of quality and to pay more attention to employees and customers. There is a definite need for managers of service firms dealing with organizations to increase the level of use of service quality management tools.

Finally, it is obvious that service productivity practices are not as popular as quality practices. Furthermore, the most popular productivity practice (selection of the best possible suppliers) is considered by many to be a quality practice. Firms dealing with consumers would likely find it advantageous to increase their interest in and use of productivity practices. This is also true for firms whose employees are unionized.

DISCUSSION

Some of our findings lend themselves to interesting in- terpretations and explanations. The fact that companies catering to other companies are somewhat more produc-

tivity conscious may simply reflect the basic demand that companies generally make of their suppliers, "Help me be more competitive by cutting my costs" Despite the official quality-laden language of many companies toward their suppliers, their body language all too often stresses costs.

The fact that companies serving other organizations put more emphasis on making every transaction profitable shows that the trend toward closer relationships with customers is still more prevalent in companies serving consumers. Apparently, these companies do not recognize that profitability should be assessed over the duration of a customer relationship and that it is uneconomical to treat every transaction with a customer as if it were the last. This in a way appears to be incongruous with the fact that they have more activities to enhance customer loyality. Rela- tionship marketing aims at reaching a company's profitability objectives through a long-term relation, not on sin- gle transactions.

The finding that unionized companies are not too keen on productivity improvement programs is not surprising. Unions don't like productivity programs. In fact, unions generally don't like the word productivity. As a result, the management of smart unionized companies avoids an- tagonizing unions and shies away from using the word at all. Of course, this does not mean that they don't do any- thing to improve productivity, but rather that they often couch any such program that they have in quality parlance.

This last point highlights an important problem with any research on productivity and quality. The quality move- ment has defined and redefined quality in many ways, and these definitions may embody many elements of productivity. Every total quality management program devotes substantial effort and resources to productivity improvement, even though the word is scarce ly- i f at a l l -men- tioned. Such wide-ranging definitions- as well-intentioned as they a r e -b lu r the issues and are the source of consider- able confusion. We may be picking some of that confusion as noise in our questionnaires. This may in fact be one of our strongest conclusions: before we can truly understand the differences between quality and productivity, the terms must be defined clearly and separated conceptually. The word productivity must be reinstated wherever it has been banished. Calling a spade a spade is the first step toward mutual understanding-particularly between unions and management.

LIMITATIONS AND FUTURE RESEARCH

The most important limitation of this research is the lack of a strong theoretical background on quality and produc-

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tivity management practices. In the last decade, researchers have been infatuated by the measure of service quality and have paid far less attention to the management of quality. On the other hand, there has been much less research on service productivity generally. Accordingly, there is a need to develop tools to measure the usage of service quality and productivity management practices and to link these with successful and less successful operating results of firms.

There is also a need to further our understanding of management practices and the contingency usage of these practices in different types of firms. Finally, it is hoped that, in the perspective of improving the teaching of marketing management in business schools and faculties, that researchers do not lose sight of the importance of the substantive domain.

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