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Service Operations Management

Chapter 6 – Service Processes

Service processes and their importance End-2-end (e2e) processes – the chain of processes from start to finish. Most service processes “process” customers, materials, information and equipment. If changing, managers must change e2e, not only the delivery of the service.

Front office and back office must be arranged in an appropriate sequence to create the customer experience and outcome.

Front office processes Can be:

Face-2-face Telephone Webpage

Customers in the front office can be resources, e.g. in consulting. The benefit is that it is a free, additional resource to the organization. The downside is that it adds unpredictability and variation to the process. The organization needs to select and train customers.

Front offices differ in volume-variety and all that is associated. Some organizations move more work to the customer in order to reduce cost for the company/customer at the expense of time and effort.

Back office processes Here there is no customer involvement, which usually means higher efficiency. There are trends to move more work to the back office because:

Cost and consistency benefits Reduces need for immediate customer response

o Trade-off: customer wants lower price Expensive technology require scale to justify purchase

Others move work from back- to front office.

The customer experience Experience includes personal interaction with the organization, its staff, technology and facilities. They may be:

Face-2-face Telephone (call centre, can be moved to low-wage countries) E-service or other remote interaction (letter, mail, ATM)

Service design has an impact on customer perception. Perceived degree of risk/uncertainty is an aspect of variability in service encounters.

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Financial risk Physical risk Psychological risk

o May be due to customer lack of confidence and competence o Anxious customers are difficult to handle o Assuming that the customer has the competence required (and a high

degree of public display involved) may make a fool out of the customer o Some people feel uncomfortable with a lot of people present, whereas

front office staff probably don’t

Customer perceived risk and social interaction

Social interaction is linked (in some way) to a mechanism for managing risk. Observing staff behavior may give indications for example. There is a wide range of customer variables that will complicate the experience:

Customer mindset o Customer complaining may not have a good mindset

Customer mood o Linked to the previous o It is dangerous to make assumptions about the customer’s mood. The

customer may be angry for something that has nothing to do with the service

Personality clashes

Perceived risk

Social interaction

Supermarket

Professional service

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o “Transference” – when you have experiences a bad relationship with someone before and translate it into the service provider you are dealing with, maybe because they look alike, or act alike, etc

These variables need to be considered when designing and managing the process

The need to manage the total chain of processes Failure to manage e2e processes inefficiencies across the organization or supply chain lack of consistency, poor quality and lead times, and increased costs.

Managers tend to draw a boundary around their processes (usually geographical or physical boundary). The problem faced by many customers is at the interfaces between front office and back office that together create value.

By assessing and designing processes from the view of whatever being processed, we can expose the interface problem. The objective is to have an efficient process from operations perspective, and seamless service for the customer. In a seamless service:

Customers should: o Flow smoothly o Experience no discontinuity

Staff should: o Take process ownership o Take customer ownership

Managers should: o Process (not functional) perspective o Understand whole process o Understand how they fit into the processes o Work in cross-functional teams to assess and improve the design

The process environment – the servicescape Servicescape – physical and informational environment in which a service is created and delivered: the environment for back-office staff, front-office staff, and customers. The servicescape can influence:

Customer experience Customer behavior Employees

Affecting the customer’s experience Choice and style of facilities should be in tune with the desired experience. Location, size, structure and décor of building will affect experience. The organization can use artifacts to establish or reinforce the desired image and create customer experience.

Influencing customer behavior Customer behavior (and thereby experience) can to some extent be determined by the servicescape, its ambience, lighting, décor or music. Environmental design is sometimes referred to as “aesthetic atmospherics”. One example is a warm bar to encourage more drinking. The servicescape also influences the nature of social interaction (seat arrangement, amount of background noise, etc.)

Individuals react to their environment with two behaviors:

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They are attracted to it (approach) They are repulsed by it (avoid)

Design of equipment or information interfaces will affect behavior, in particular their ability to interact with the service provider (e.g. internet-based purchase). Fast and user-friendly interfaces approach, whereas slow and difficult interfaces avoid.

Influencing employees Good environment approach behavior by employees more committed to their work.

Understanding the nature of service processes Service need to be “engineered” and controlled. To do so, organizations must understand the nature of service processes, by asking:

How much service product variety? o Runners, repeaters, strangers

Volume-variety o Capability, commodity, complexity, simplicity

Where is the value added? o Process mapping

Service product variety The first step in designing and managing processes is to understand the mix of runners, repeaters and strangers

Runners

Often found in high-volume operations Relatively predictable Lend themselves to efficient operations through tight processes control or

automation

Repeaters

May be created by default rather than design, e.g. when organization expands offerings. The process was maybe supposed to handle few standard services but now has to deal with much greater variety. As a result:

o Often absorb more resources because lower volumes cannot justify automation

o May involve some degree of re-learning or re-adjustment of a process if last repeater was a long time ago

Strangers More usual as one-off projects, least efficient and most difficult to deal with because:

May be difficult to forecast demand Resources required to deal with demand may be less certain They are least well defined in terms of resource requirements

Organizations that are used to strangers are more flexible than organizations used to deal with runners.

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Managing runners, repeaters and strangers Runners, repeaters and strangers may all exist in one organization! The relative mix of these will suggest the most appropriate type of service process. Also, type of process may limit or restrict the variety of activities that can be carried out.

Types of process: Volume and variety

Capability processes They have the flexibility to change the experience, outcome and delivery process. A key task for these organizations is to ensure that they maintain their skill base. A number of attributes generally apply for these operations:

The service concept is based on a skill or knowledge base Skill resides with individuals. There may be a problem if they leave the

organizations No (little) documentation, because:

o No consistency in activities o People may resist (don’t want to be controlled)

Little consistency in approach to tasks R&D usually centered on the individuals capability to deal with a wide range of

customer requirements Strangers and repeaters dominate, some runners exist in the support functions

Managers of capability operations must be good at assessing the impact of an additional task on an existing workload.

Commodity processes The service concept is clear and rigid, particularly when providing the same service across different locations. These organizations tend to compete on the ability to provide consistent quality at a competitive price. Central tasks for these operations include:

Maintaining consistency Giving standard service at the same time as making customer snot feel like a

number Provide appropriate level of service and managing resource productivity to tight

targets

Areas where they differ from capability processes:

Service concept Front-office staff (age, wage) Training of employees Capacity Operational focus on service factory or DIY Mass-service and mass-service shops Runners (some repeaters when trying to differentiate)

Task of managers is to create an environment where activities can be carried out efficiently and consistently. Capability managers want to be better at responding to changes, whereas commodity managers want to reduce changes!

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Profiling processes Using the profiling tool, organization can identify potential mismatches, which typically arise because the service task has changes, and the delivery process has not. For example, you can profile different departments, or areas, in the organization where you might have different processes. Using profiling tool compare and contrast processes in totally different service sectors is of limited value.

Off-diagonal processes (natural line – “line-of-best-fit”) More flexible processes, better support systems and better training for employees wil mean that the line can be made wider.

Operating in the complexity area Mass customization (provide the customer with whatever they want, however they want it, and wherever they want it at an affordable price). Internet banking for example.

Operating in the simplicity area May be good for a small niche player, gaining on the margins. Can also be good for small or large companies as a lot or start-up operation (incubation).

Variety

Volume

Capability

Simplicity

Complexity

Commodity

Effective area

Cost of flexibility

Cost of low volumes

Decreasing unit cost

Increasing process definition

High Low

Low

High

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Adding value for the customer Managers must understand where value should be added. Value can be customer value, brand value, financial contribution and organizational contribution. It is important to view service operations in the multiplicity of interrelated processes, both front- and back-offices, and recognizing where value is added.

Identifying the key decision areas The key decision area matrix (KDAM) is a means of categorizing service processes. It helps to identify where value is added.

Customer involvement – the extent to which the customer can be seen as a resource. Distinguish between customer involvement and customer contact.

Service factory Found in the high-volume/low-variety sector. The back-office is the prime key decision area, where efficiency and consistency is the prime task. Here, front-office activities are moved to the back-office and frontline staff’s role is to make customers feel special.

Service products Service partnership

C-F-B C-F-B

Service factory DIY services

C-F-B C-F-B

Customer involvement

Low High

Repeaters/Strangers

Runners/ Repeaters

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Customers are trained to make the operations more efficient (fill in forms, not ask for non-standard things, etc).

DIY services Also found in high-volume/low-variety with runners/repeaters but with high customer involvement. These services have to balance decisions in all areas. Significant effort lies in the design work for the initial setup-up of the facilities and networks. Customer capability must be included in the design to ensure that the service runs smoothly.

Service projects (service products) A market research company is a good example of this kind. The service project organization need to have much closer links between front-office and back-office, than service factories, because they will deal with strangers/repeater variability in demand volumes and process types. Front-line staff must have more skill and flexibility than service factory organizations.

Service partnerships Here there is much co-development, close relationships between provider and client. Because of tight links, efficiency is usually related to personal chemistry between those involved. The challenge is to manage communication links between the front-office and back-office. The back-office provides support to the front-office and may be perceived as “low-status”.

A mix of decision areas The challenge for larger organizations is that all four types of key decision areas may exist in the organization. It is important to recognize and manage this (a “one-size-fits-all” approach is not appropriate).

Task allocation Organizations need to decide where to allocate resources (front-office, back-office, customer?).

As the service concept changes, service type will change and thus task allocation will change. The key decision area matrix can give an insight into the impact of changes in service concept as they relate to the changing role of the three components of customer, front-office, and back-office.

Introduction of new services may interfaces between front-office and back-office becomes more blurred.

“Engineering” service processes and the customer experience Few services have engineers like manufacturing to design and evaluate processes. Because of the intangibility of services, service process and customer experience design is often an ad-hoc trial-and-error activity. Faults and problems are “designed in” poor perceived service and inefficient process.

The key to good service design is to have a customer perspective (outside-in) and understanding the whole process.

There are several tools to “engineer” process and customer experience, i.e. design new process, or assess and improve existing ones:

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Process mapping (front-office and back-office) Walk-through-audits (front-office) Emotion mapping (front-office) Customer experience analysis (front-office)

Process mapping Process mapping is the chartering of a service process in order to assist in the evaluation, design and development of new or existing processes. The essence of it is to capture all activities and their relationships on paper (requires a team of people who understand the various aspects of the process).

This activity is time-consuming but can give significant results, first of them is a shared view and realization of their (the people involved in the mapping) roles in the e2e process. Gaining maximum benefit from process mapping involves two issues:

1. Mapping and mapping tools 2. Turning the map from a descriptive to an analytical tool

Mapping and mapping tools The first question to answer is what level of detail the map should have (macro, micro or something in between). The minimum level depends on the purpose of the map, but usually the overall process and major elements should be visible. Then details can be added when needed.

Symbols and structure may differ between companies, but the important thing is that everyone agrees on them. The symbols and structure should be common and understandable with a single meaning.

The lines may be colored to depict different flows, volumes, routings, etc. A potential pitfall is that too much detail is shown, obscuring the issues and opportunities for improvement.

Analysis of process maps Process mapping can help communicate complexity of the process or help individuals to agree or realize the steps involved in a process. What is requires to derive maximum benefit from a process map is to ask key questions that help turn it into an analytical tool:

Does the process support the strategic intentions of the operation? Does each activity provide added value Is the process in control? Who owns and has responsibility for the process? Is the level of visibility appropriate? How efficient is the process? How can the process be improved?

Walk-through-audits Walk-through-audits done by staff, managers or independent advisors can help to evaluate and improve the process. The audit should be based on a checklist of questions. The key requirement for this approach lies in the choice of attributes to assess and the

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scales on which the assessment will lie.

The audit should be developed to identify critical elements of the customer experience from first contact to exit. It is crucial that not only people having knowledge about the service develop the audit. The advantage of this is that managers can carry out regular checks on key aspects.

Emotion mapping Process mapping and audits are usually from an organization’s perspective. Emotion mapping focuses on one key outcome of customer experience: emotions. Emotion mapping charts emotions at each stage of the process. Out experience emotions (affects) level of satisfaction and post-purchase intentions.

Our main positive emotions are love and happiness. The main negative are anger and fear. Others might include sadness, surprise, disgust, guilt, etc.

Emotion mapping develops the process map to include emotions felt, or assumed to be felt by asking: how would this make the customer feel?

Customer experience analysis (sometimes called service transaction analysis (STA)) This is an extension/development of walk-through-audits and emotion mapping. It incorporates:

Service concept Customer experience Transaction quality assessment Service messages Emotions

in order to assess and improve customer experience.

STA comprises six stages:

1. Service concept needs to be agreed upon and specified 2. Mystery shoppers, advisers or customer-consultants then walk through the

process (actual) to assess how customers might assess each transaction. Each transaction is briefly described in the left column and an assessment of it in terms of delighting (+), satisfactory (0) or unsatisfactory (-) is noted in the middle columns

3. The interpretation as to why the customer arrives at this evaluation is entered into the messages column

4. The final column records the emotions felt by the customer during the experience 5. The assessment of +, 0 and – are joined to give a very visible profile of the

transaction outcomes and an overall evaluation is entered at the foot of the table 6. Working from this sheet, service designers, managers and staff can begin to

understand how customer might interpret the service process and then to discuss improvements can be made

Unlike other tools, STA tries to identify reasons for outcome so that improvement can be made. Key advantages are:

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It requires managers and employees to think about, and express in words, their service concept

It forces managers and employees to see the process from the point of view of the customer

It asks directly and explicitly what each transaction means to the customer and, importantly, what gives them this impression

It assesses physical, tangible issues as well as the service scripts and it also asks what messages these give to the customer and captures the resulting emotions

It attempts to bring a systematic evaluation of a complete service process

Customer Experience Analysis (real-estate agent) Organization Process Customer

Real estate agent Buy house Purchaser

Service concept Prestige properties with excellent service for the discerning purchaser

Transactions Score + 0 -

Messages Emotions

Pre-contact X X X

We are accessible/available Expensive but competent Etc….

Concerned Good location Relieved Good facilities

Cared for

Ignored Etc… Introduction Etc… Overall evaluation: Poor service design. Little thought for purchasers. Company is not customer-oriented. Poor service

Controlling service processes SPC, etc…

Repositioning service processes Service organizations are undergoing pressure to change. Capability operations are under pressure to decrease costs, and increase volume. Commodity services operations are under pressure to increase flexibility and customization.

From capability to commodity Many innovative organizations have a requirement for growth. Small firms may want to go international and larger firms may have an innovative product for a segment and want to deliver it in a package to all customers.

Whatever the reason, some issues must be addressed:

Customer may require consistency across locations Organization may set stricter guidelines for staff as to the scope and style of work

in order to preserve image Capability (previously held by individuals) must be replicated through:

o More specialized resources o Tighter process management

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o Specific training o If the above are not addressed, the growth may be limited by scarce

resources To sustain growth, organization may have to develop more competitive sales &

marketing activities. This might lead the organization into previously non-experienced cost competition

Perhaps the greatest impact is on individuals. They probably joined the organization for autonomy, and may not want to turn their creativity into developing consistent and efficient processes.

From commodity to capability Organizations may not want to compete on price only, and may want to offer a wider range of services. It can be possible to design the delivery process that delivers a wide range of services without increasing the complexity of the operations (mass customization). Two principles for mass customization are:

1. Develop standard modules 2. Postpone customization until the last possible stage. Standardized until the last

stage benefits related to high-volume/low-variety

As the number of service delivery processes increase, the mix of runners, repeaters and strangers will change, and hence the operations task will change. These tasks may include:

From managing back-office efficiently and consistently to building front-office flexibility

Requiring front-office staff to give informed advice to individual customers (not just taking orders)

By training and use of information systems, the organization can “upskill” front-line staff to make them seem more like an expert

Allowing greater staff discretion

Front-office staff must have technical and interpersonal skills. Moreover, the organization must manage “specialist” employees previously working in the back-office, but are now moving to the frontline.

The role of management is to go from an enforcer of the service concept and process owner to ensuring that employees are developed and retained. Retention is important, because commodity employees are usually low paid and have little training, whereas capability organization employees are highly paid and trained.

Strategies for change Those that lie in the middle section of the natural line have 4 basic strategies to deal with transition.

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Building capability through systems and training Organization may want to offer solutions rather than a narrow range of services. The approach here is to invest in information systems and expand the role of the front-office staff. The advantage is that the organization is well places to deal with new challenges. The disadvantage is that it requires a significant upfront investment.

Building capability through incremental development This is a less risky approach. Here, the organization can take on activities or client assignments normally outside their sphere of action. They deliver through “learning from experience”. This process is inherently inefficient and potentially damaging to future customer relationships. It is particularly sensitive since capability organizations must of work closely with customers.

Moving to a commodity by constraining flexible resources Example – gourmet chef working at a fast-food restaurant. Here, there are significant challenges for management, employee morale and in development and provision of cost and quality control systems. If these are not in place, the organization will become less competitive.

Moving to commodity through investment in process capability Organization may have identified a market need for a high-volume version of an existing or new service. Like the first strategy, this requires investments. The advantage is that you become a “first-mover”. The disadvantage is the upfront investment.

Variety

Volume

Capability

Simplicity

Complexity

Commodity

Decreasing unit cost

Increasing process definition

High Low

Low

High

1 – invest in systems and training

2 – develop incremental capability

3 – constrain flexible resources

4 – invest in process capability

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Usually, customization is more appealing than the need to create efficient and consistent volume services. This can lead to problems in matching the service and process.

Managing the gap between market position and operations In selling the benefits of a particular service, it is common that companies emphasize customer flexibility while continuing to operate on a mass production basis.

This is an often very effective strategy. The main danger is that customer satisfaction will fall if the gap between what is offered and delivered is to great. To counteract this, organizations may adopt several strategies to “manage the gap”:

Customer service departments o Usually found in consumer services o The customer service department acts as “sweepers” to deal with

complaints and to provide a relatively cheap human interface between the customer and back-office

Named personal contact o You have a designated person, main objective is to make you not feel like a

number Account or client manager

Variety

Volume

Decreasing unit cost

Increasing process definition

High Low

Low

High

Market flexibility & customization

Operate efficiently & consistently

GAP

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o B2B usually, KAM (Key Account Manager) Change the nature of the service

o E.g. from service partnership to DIY services Change customer expectations

o If high-volume/low-variety, customer should not expect customized service

Chapter 7 – Service people From a customer’s perspective, the difference between a mediocre and excellent service lies with the person who serves them (point of contact). Managing service providers is important because:

They are responsible for delivering service to their customers (internal and external)

They form a significant element in experience Front-office staff represent the organization and project the brand value Professional services, for example, depend on the skills and capabilities of

individuals

Understanding the pressure on service providers All service providers face two distinct pressures: from managers (organizational pressures) and from customers (customer pressures).

Intensity of contact: involves 2 factors, time of involvement and value for customers.

Expectations: constant presence of the customer in high-contact services, customers think the service is special for them, they have inappropriate expectations, they have high expectations due to past experiences.

Organizational pressures

Nature of task

Service design, processes and resources

Performance objectives and targets

Reward and appraisal systems

Service providers

Customer pressures

Expectations

Intensity of contact

Mood and anxiety

Competence

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Front-office may find themselves taking a variety of roles, including:

Order takers Advice givers Image makers Service deliverers Complaint handler Therapist Trainer Coach

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Resultant issues for service providers

Organizational pressures

Nature of task

Service design, processes and resources

Performance objectives and targets

Reward and appraisal systems

Service providers

Customer pressures

Expectations

Intensity of contact

Mood and anxiety

Competence

Issues

- Motivation - Role clarity and fit

(customer need or organizational requirements)

- Relationships - Risk - Stress

Potential outcomes

- Increased costs - Low morale - Ill health - Psychological damage - Learned helplessness (passive, maladaptive

behaviors, immaturity, etc.) - Poor service

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Providing inspirational leadership This is not a solo act by some CEO! Leadership can be categorized as transformational (develop and project a vision of the future, motivate, etc.) or transactional (day-2-day management). Both are equally important, but transformational may be more important during times of change. There are four competencies of great leaders:

Management of attention – getting attention from people Management of meaning Management of trust – walk the talk Management of self – know your strength and weaknesses. Don’t blame others

Transactional leadership is just as important. Front-office staff may also have influence, when getting more discretion.

“Internal locus of control” – sense of process ownership in the heart and minds of employees.

Managing providers

Providing inspirational leadership

Harnessing the power of teams across the organizations

Clarifying the roles of service providers

Using scripts appropriately

Defining and enabling appropriate levels of employee discretion

Establishing effective communication to employees

Involving employees in performance improvement

Encouraging ownership of customers and process

Organizational pressures

Nature of the task Design, processes & resources Performance objectives & targets Reward and appraisal systems

Customer pressures

Customer expectations Intensity of contact Mood and anxiety

Customer competence

Potential results

Insipred and invoved employees

Responsive and responsible employees

Process and customer ownership

Employee commitment and retention

Enjoyable work

Effective and efficient delivery systems

Business improvement

Service providers

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Harnessing the power of teams across the organizations One critical design decision is the extent to which opportunities for teamwork may be built into the delivery process. But the use of teams is not appropriate in all situations. If individuals working together create synergies, they are a team. If not, they are a group. By working in teams, you get the benefit of group support (specially in stressful roles). This cannot be overestimated.

Impact of burnout can be anticipated and reduced y developing the mutual support mechanism of a group, providing training to deal with difficult customer and to build in periods away from stressful roles. Benefits from having high-performance teams are:

“2 brains better than 1” As they work to develop clear goals and to improve their process, they also

develop more effective means of communication, which allows them to respond to changing customer needs more flexibly

Members (with time) build trust in others and in others capabilities more effective delivery system

High-performance teams often enjoy their work more and have more fun

Note: the customer may as well be a part of the team (professional services). Some principles for developing successful teams are:

Demanding performance-challenge more effective than team-building exercises Pay attention to team basics (size, etc.) Team performance is more important than individuals. Etc…

Team initiatives usually fail because little attention is paid to team design and team process. It is not easy to move to autonomous teams. Change in leadership style and employee discretion is required.

Team leaders are extremely important! They often feel pressure from both managers (who sees them as a part of the team) and team members (who see them as managers).

The downside of using teams is that the team can become too strong, not letting anyone in out letting anyone out, which will reduce flexibility. Having a good team of team leaders can prevent this.

Clarifying the roles of service providers People work more effectively when they have a clear understanding about their role. If front-office staff are to be motivated to provide good service, role conflict and role ambiguity need to be minimized.

Role conflict may occur when o Basic service design is in error or o The demand of the job are in conflicts with the individual’s personal view

of how much status is conferred in the role Role ambiguity occurs when the person is unsure of the requirements of the role

Role ambiguity and conflict may occur during organizational growth and development.

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Using scripts appropriately Scripts may be used to provide consistency and efficiency in delivery. But it can also be used to provide a sense of security for the customers and employees. Scripts create procedures, which help employees to know what to do, and in what sequence, in specific situations.

11 functions for using scripts in service delivery:

1. To assist the service employee to find out what the customer wants or needs 2. To control the customer

a. Should help the employee to guide the customer through the system with minimal disruption. Important where customization is not desired

3. To establish historical routines that may be relevant to the service encounter a. The service designer should provide the appropriate triggers to “memory

organization packets (MOP)”, which allow the customer to move into what may often be unconscious routines, which may lead to early involvement in the service delivery process

4. To facilitate control of workers 5. To legitimize organizational actions

a. The script informs the employee as to what behaviors and attitudes the management believes customers expect

6. To serve as analogies a. Scripts learned in previous employments may be used as a basis for new

scripts in later, similar situations 7. To facilitate organizational behavior 8. To provide a guide to behavior

a. The customer may have experienced similar service before, so you need not to explain why e.g. they should fill in this form

9. To buffer or exacerbate role conflict a. May help when the employee is faced with giving unwelcome or

unpopular information to customers (“it’s company policy”) 10. To provide as a basis for evaluating behavior 11. To conserve cognitive capacity

a. Employees may be able to multi-task, because the scripts may be performed as if on “autopilot”

There are a number of problems with using scripts in delivery as well:

They may become too inflexible o Customer may not respond appropriately to fit the scripts they

perceive that employees are incompetent They may lead to a customer perception of robot-like behavior

o “How is the food tasting?” e.g. They may lead to defensive behavior

Defining and enabling appropriate levels of employee discretion It is not possible (nor desirable) to have a script for every possible situation, so some degree of discretion must be provided to service employees. This lines up with the trend of using the knowledge of everyone. Most people are empowered, but the critical question is how much discretion they have. Giving some limit to employee discretion is

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usually better than no guidance at all. Note: empowered employees means (to some degree), disempowered managers. There are 3 types of employee discretion:

Routine discretion Means that the employee has discretion regarding how the basic task is performed rather than what task is taken. The more complex task, the more difficult is it to describe and control each step.

Creative discretion Is exercised by those who develop both what and how they do things (product-developers?).

Deviant discretion It differs from the previous two in that it is generally not approved by the organization, whereas the other two are recognized and approved by it. Deviant discretion is potentially disruptive, since employees act on their own authority, rather than on behalf of the organization. An organization made up of people acting like this is chaotic. On the other hand, an organization without such people may become stagnant, without challenge to status quo.

Key dimensions

Organizational style o Fluid – those who must change their structure relatively frequently.

Project-based organizations for example. These consulting organizations

Type of employee discretion Creative

The anxious zone

Facilitative

Directive

Leadership style

The frustrating zone

Fluid (empowered)

Organizational style

Rigid (imposed)

Perceived individual employee discretion Low High

Compliant

Adaptive

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will need to adopt processes for each situation so will lie at the “fluid” end of the scale

o Rigid – service operations with clear operating procedures Perceived individual employee discretion

o How much discretion employees “feel” they have or feel that they are capable of

o Different when looking from different perspectives (managers, employees)

The compliant organization This is usually found in high-volume/low-variety operations. Characteristics are:

Focus on consistency Well develop process documentation, with training to employees on how to

behave in each situation Possibility of automation and/or employment of low-cost labor Management style is usually directive, due to e.g. high employee turnover,

employees inexperienced and with low motivation Performance measurement usually short-term (response time, orders taken, etc.)

Not all employees in the compliant organization are low-paid though (pilots e.g.) The problem for this organization is that the service delivery feel as if it is imposed by management. Another problem is that front-office staff lack motivation and ownership to the service concept and customers. The challenge for service operations managers is to engender both ownership and a spark of creativity. The objective here is to create a feeling of ownership rather than imposed. Broadly, the approach utilized is:

Communication Involvement (kaizen e.g.) Celebration (front-office staff often only deals with complaints) Teamwork – organizing team may create a sense of purpose and provide

opportunities for rotation, support and motivation

The major benefit of using teams is that the organization can increase routine discretion. Al these approaches have on thing in common: they create a sense that the organization values the contribution of even the most junior employees.

The adaptive organization Low-volume/high-variety. Characteristics are:

High degrees of creative discretion (in both product and process development) Dependence on individuals’ skills and knowledge Resistance to standardization Emphasis on innovation R&D usually focused on the professional development of people Management style is likely to be facilitative Performance measures are long-term

The challenge is to ensure that a reasonably consistent approach is adopted to service delivery. People might not share knowledge (they think it will weaken their position).

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When individuals leave the organization, this becomes a problem. Management may need to focus attention on the following:

Motivating key individuals, by offering opportunities to extend skill and knowledge

Emphasize collaboration Develop multiple links with clients so the organization don’t stand and fall with

key individuals

Managing transitions 2 common conditions describe what happens when organizations try to increase/decrease the nature and amount of discretion (anxious zone & frustrated zone).

Compliant adaptive: the anxious zone

This is particularly relevant if the strategy is to increase the range of service options available. Implementation of this will typically involve investment in training and information systems. But no matter how well managed, individuals change at different speed, due to personality and history. Thus, individuals (in this case) are being moved from their “safe” environment to an environment where individual decision-making is required.

This may be summed up as “being empowered but not feeling it”.

Individuals want the challenge but are either unsure of their own ability or are uncertain as to how much real discretion the organization is willing to give them. It takes time to change, do not assume that the individual can’t/won’t change. What is needed is support and training. Front-office in the anxious zone will probably not always deliver service to the new (usually more demanding) standards.

Adaptive compliant: the frustrated zone

Common reason is that as a consequence of actual or desired growth, systems and processes are standardized, reducing opportunity to develop own approach. Professional services wanting consistency across borders e.g. Characteristics of the frustrating zone are:

Individuals resist, claiming that the system prevents them from operating in the most effective way

These individuals are usually extremely vocal about these perceived or real restrictions

Employees in this zone often think they have high degrees of discretion, even though the standard process has been implemented “feeling of being above the system”

The problem is that people having high discretion have a hard time letting it go. It is important to recognize the concern of these individuals, because they usually possess skills essential to retain. This can be done by involving them in activities (with opportunities for personal development) that do not conflict with the objectives of the standardized process.

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Balancing empowerment and control It is important to note that when an organization wishes to make significant changes, individuals must be treated as such. Different individual will react differently.

A dilemma is to know how and how much individual employees can be empowered. 4 control organizational systems that assists managers in moving toward employees taking more ownership of the process exist:

1. Diagnostic control systems a. Standard performance measures (sales per employee, etc.) b. Managers may watch these indicators and allow employees to decide how

they should be met i. Danger: May be pressure to “massage” the figures to demonstrate

ability. Thus, these measures are not sufficient in themselves to give management control

2. Belief systems a. These convey the key values of the organization b. Can inspire employees c. Can give impression of “flavor of the month”

3. Boundary systems a. Systems that state minimum standard or express the rules that govern

acceptable behavior in terms of what is done and not done 4. Interactive control systems

a. Diagnostic: Detects when organizations is failing to meet performance standard

b. Interactive: Detects in what way the environment and therefore the task of the organization might be changing (focus groups e.g.)

Managers need to use all four together, in order to provide an appropriate environment.

Establishing effective communication to employees Employees usually don’t like being kept in the dark about what is happening. They like to be involved in the development. Communication is the key to success. Mechanism to communicate by include:

Briefing by managers Annual meetings Roundtable meetings Q&A sessions Intranet-based information and updates Informal meetings and gatherings Newsletters

4 communication responsibilities for managers (FAME-model):

1. Focus a. Clear focus with few priorities, which are repeated and reinforced

consistently 2. Articulate

a. 3.4 DPMO e.g. Simple and memorable 3. Model

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a. Leaders must champion organizational values, lead by example and challenge unacceptable behavior

4. Engage a. Leaders must make a connection between the organization’s agenda and

individual’s agenda b. Listen, facilitate, ask effective questions, handle difficulties that may arise

when employees speak up

One significant reason for failure is under-communication. Communication must be carefully planned to avoid contradictions, repetition (contradictory??? See point 1.), overload of trivia and insufficient communication of key issues.

Involving employees in performance improvement Actions to that build self-esteem of employees will provide an antidote to the pressure they experience. Basic – involve people closest to the task being improved.

Encouraging ownership of customers and process Employees like to feel that they are able to exercise some influence over what will happen to the customer they are serving and the processes they follow. Important here is management example. Likewise, giving employees responsibility feel like they control the process and not the other way around.

Managing customers Sometimes, customers are also service providers. Managers must understand how these “service providers” should be managed so that they fulfill their required roles and display the desired behaviors.

Customer roles Roles depend on nature of activity and approach determined by service designers, and include:

Service providers o Provide themselves (and sometimes others: atmosphere at a restaurant

e.g.) with a service Service specifier

o Customer must provide clear information about requirements before the appropriate service can be selected and delivered

Quality inspector Trainer/role model

Benefits of customer involvement

Inclusion o Loyalty

Resource productivity Customer control

o Customers feel that they have control over what happens to them

Customer management issues It can be harder to manage and control customers than employees. Managing customer entails some or all of the following:

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Defining customer competence o One of the changes in the service concept that may redefine the way things

are done relates to the extent to which the organization assumes it is dealing with competent or incompetent customers. For example, a company moving from B2B to B2C must understand that these might not be as competent as the people they dealt with in the client companies

Customer selection o Clear about which segments to target. Particularly relevant for services

where experience is made up in part by other customers, e.g. theatre o One example on how to manage this is use of dress code at restaurants

Customer training o Time must be set aside to training

Customer motivation o Rewards (money when booking on-line e.g.)/fines (late return on books

e.g.) Customer removal

o Important in social situations where one group of customer may damage the experience of the majority

Chapter 8 – Resource utilization Having materials, staff, equipment and process technology utilized to the right level has impact on efficiency (cost) and customer satisfaction (customer may be a resource). Short- and medium-term capacity management is management of existing resources, not developing new capacity.

Capacity management Capacity management is a delicate task since underutilization and overutilization has great disadvantages. Underutilization can damage long-term success by:

Expensive resources not earning revenue Customers suspicious of services that appear to be idle Employee motivation may decline. Concerns about future employment may lead

to poor service attitudes

In the same way, overutilization may damage long-term success by:

Many aspects of service delivery suffer (waiting time, e.g.) Staff make more mistakes and may leave the organization due to stress To deal with overload, staff may do tasks they are not trained for

The task of capacity management is to balance underutilization and overutilization, with the constraints of the network and facilities of the operation. Capacity management is concerned with putting a plan in place given the forecasted or expected demand.

Defining service capacity Service capacity – the maximum level of value-added activity over a period of time that the service process can consistently achieve under normal operating conditions.

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Overloading resources may lead to increased output. However, the trade-off is quality, the service concept, and the nature of the service. It is important to not change the service concept for productivity gains.

Measuring capacity A simple measure is demand during a period of time. However, this is not helpful for the day-2-day operations. A number of factors make the assessment of service capacity difficult:

Service product mix o Only runners easy o Repeaters & strangers difficult

The impact of location o Travel time e.g.

The extent of intangibility of the service product o Low levels of intangibility easy (fast-food restaurant) o High levels of intangibility complex (gourmet restaurant, staff may

devote time to building relationships) The ease of identification of resource constraints

o Bottleneck identification and improvement

There are three short-term capacity strategies:

Level capacity strategy Chase capacity (chase demand more appropriate) strategy Demand management

Level capacity Here, the objective is to maximize the utilization of expensive, fixed, resources. To do so, the organization may need to make trade-offs (mostly around quality). General principles about level capacity are:

Objectives achieved at expense of quality Customer may receive inconsistent service levels

o May be resolved by yield- or queue management Danger that the service provider not make attempts to cut the emotional cost of

waiting for the customer, making it vulnerable to competition

Approaches adopted under level capacity include:

Promoting off-peak demand o If used with pricing strategy, caution is required (image)

Queue management o Do not make assumptions that customers will wait in queue

Booking systems o A form of queue management o Allows the organization to schedule capacity o Allows the customer to utilize waiting time themselves

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Chase capacity Usually, this is adopted by high-volume consumer services since ready and rapid access to service is a major aspect of their competitive strategy. This is possible for them to use because their employees require low amounts of training. Management consultants would not be able to do this. Here, capital resource utilization is not the prime goal, but cost reduction is still important. The challenge is to develop volume flexibility.

General principles and issues of chase capacity are:

Volume flexibility o Must be able to respond to changing demand profiles

Usually achieved through employing staff on flexible contracts Although a principal objective is to ensure that customer service targets such as

availability or response times are achieved, many organizations fall into the commodity category

A challenge is to ensure strictly controlled costs and that flexibility is not achieved at any price

Typical approaches to chase capacity include:

Flexible staffing levels o Pro – flexibility o Con – staff may not want to work inconvenient times, etc.

The use of subcontractors or temporary staff o Pro – can deal with short-term overloads o Con – staff may not be trained or motivated

Making use of customers o Be very careful with this, so you don’t change the service concept

Demand management Typical approaches:

Pricing strategies Restricted service at peak times Specialist service channels Advertising and promotion

o Tends to increase the inaccuracy of any forecast

Putting the strategies together Most organizations use all strategies, differently in different operations, dependent on respective underlying cost models.

Operations planning and control Operations planning and control is concerned with the sequencing, allocation and control of capacity and ensuring the flow of resources to meet the schedule.

Sequencing and allocation of capacity Most organizations have rules or policies for allocation of capacity, either informal or formal. It is impossible to satisfy all possible customer demands and remain a viable organization. To deal with this issue, sequencing rules are created to manage the prioritization of allocation:

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FIFO – consumer service usually LIFO – unusual (driving out parcels e.g.) Most valuable customer first Most critical first – emergency services e.g. Least work content first

o When demand >> supply, this approach makes it possible to satisfy many customers quickly

Most work content first o Using this rule alone usually poor performance

Which rule to use depends partly on the circumstances.

Control systems These range from comprehensive, expensive and complex systems (ERP) to very simple systems (appointment booking, school schedule). Effective control systems can give competitive leverage. Being able to quickly answer “when can you do this?” is a major factor in building customer confidence.

Ensuring that resources flow to meet the schedule A schedule is a operating plan. A robust schedule should include:

A clear customer flow (queues = WIP) Ensuring supporting resources are available to meet the schedule

o Schedule based on scarce resources. All other resources should support this

Creating schedules for interlinking activities o Called master schedule

Creating schedules for suppliers

Managing short-, medium-, and long-term schedules The details of schedules increase as “time-now” approaches delivery date. It is essential to know the time period ahead within which it is impossible to change the schedule.

Managing bottlenecks and queues Managing these can have impact on capacity utilization and customer satisfaction.

Bottleneck management A clear understanding of bottlenecks (resource constraints) provides greater clarity as to what is a realistic estimate of capacity. It seems to be better understood by manufacturing companies to manage bottlenecks – the stage with lowest throughput rate and which therefore determines effective capacity of the process.

It is important to service operations in the same way. Some general rules for managing bottlenecks are:

Ensure that only essential work passes through the bottleneck Be ruthless in taking away non-essential work Ensure that no substandard work passes through Once assessed, devote more attention to it to ensure maximum throughput

maximum effectiveness of the process

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If you have a complex system, the best thing is not trying to move it. It may be inconvenient, but at least you know where you have it

One way to find it is to look for queues. But be aware, queues may occur because employees work slower, because they know that the bottleneck ahead will stop the flow anyway. Moreover, managers must be aware of what is a long-term bottleneck and what is a short-term. The former deciding capacity.

Queue management Queues occur in most services. In level capacity, it is even “designed in”. Queues may be visible or invisible (telephone queue). Perceived waiting time is usually greater than actual. Thus, managers must try to reduce the perceived waiting time. 10 principles for this:

1. Unoccupied time feels longer than occupied time 2. Pre-process waits feel longer than in-process waits 3. Anxiety makes the wait feel longer 4. Uncertain waits are longer than known, finite waits 5. Unexplained waits seem longer than explained 6. Unfair waits are longer than equitable waits 7. The more valuable the service, the longer will the customer wait 8. Solo waiting feels longer than group waiting 9. Uncomfortable waits feel longer than comfortable waits 10. New/infrequent users feel they wait longer than frequent users

Booking system are a form of queues where the customers don’t need to be there waiting physically.

Queuing theory and simulation

Managing the coping zone The coping zone is a point where managers find it difficult to cope with increasing demand. At these levels of resource utilization, things get too busy:

Staff gets stressed Everything becomes a problem Perceived quality (customer satisfaction) declines

This breakpoint is usually reached before 100% utilization for 2 reasons:

1. It is not possible to run a resource to 100% (at least not human) 2. Several resources may be involved

Also, too low levels of utilization affect staff and customer satisfaction.

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The figure will look different for different organizations.

How to manage the coping zone 7 steps:

1. Identify the service concept 2. Determine how resource utilization is to be measured 3. Draw the outline profile

a. Based on how it looks for the majority of customer on the majority of occasions

4. Understand the nature and impact of the coping zone a. Recognize signals for entering it b. Can be useful to make a financial assessment of how it affects

cost/revenues 5. Determine the “ideal” operating area 6. Understand why coping happens

a. Of course, there are fluctuations. Thus operating at 80 % constantly is not possible

b. Key point: all organizations will enter this zone on occasions. If you do not, you have too much resources

7. Develop coping strategies a. Front-office staff often have their own ways of coping (some better than

others)

Resource utilization

Low

100 % 80 %

Customer perceived quality

High

Breakpoint

Coping zone

High-quality restaurant

Night club

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Managers base their coping strategies based on 1 or more of the following:

Giving more information to customers alerting them to possible difficulties (electric company having a pre-taped message when customers call, “if you are calling about the storm…”)

Intentionally reducing the service on offer Being clear to staff so they concentrate on “must-dos” and not “nice-to-dos” Building resource flexibility

o Moving staff from less loaded areas

The problem arises when the overload period is long. A couple of weeks may be OK, it might even raise productivity, creating a feeling of “we can do this”. But when it gets too long, management support and appreciation becomes extremely important. It may be necessary to give staff a “license to underperform” if the overload period is long.

Coping: key questions Understanding how an organization deals with coping may give clues as to where capacity management must be strengthened. Key questions to address are:

How does the profile look? How does this vary between processes and customer groups? What signals tell you that you are about to enter the coping zone (not what

signals tell you that you are/have been there)? How does this affect customers? How does this affect employees? How can you manage the coping zone better? How could you avoid being in the coping zone so much?

Coping is perhaps more obvious when adopting a chase strategy.

Improving resource utilization 4 ways:

1. Yield management 2. Building flexibility 3. Reducing capacity leakage 4. Getting organizational support for resource utilization

Yield management Yield management is focused on determining the maximum revenue to be obtained from the various segments served by the capacity at hand. This approach may damage the service concept.

Building flexibility 4 forms:

New product flexibility Product mix flexibility Delivery flexibility Volume flexibility

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Minimum effective lead times – the time it takes to respond to a change in demand. This is a valuable tool for helping managers to plan for the foreseeable contingencies. In addition to specifying type of flexibility required to deal with change, operations managers must also consider:

Range – how much flexibility is required Response – how quickly must the change be made Effectiveness across the range – most processes have an optimum range Cost of providing the flexibility

Approaches to building flexibility:

Flexible employee contracts Overtime Short-term outsourcing Menu-driven service (standardization)

o Creation of runner activities o “Dell” approach

Teamwork o Multi-functional teams

Reducing capacity leakage Sometimes, you get underutilized without being able to predict it. Reasons may be:

Absenteeism o Due to overload?

Labor underperformance o Insufficient training? o Employee “churn” – employees leaving just when they are becoming

effective Scheduling losses

o Overutilization/underutilization from time to time because: Demand profiles not fully understood Demand profiles too volatile Staff preferences for work patterns do not fit with the business

needs Cost of complexity

o The more “unusual” tasks, the more inefficiencies and rework Quality failures

o Having to deal with poor quality is loss of resources

Organizational support for resource utilization A challenge for operations managers is to understand resource utilization in the context of a changing world. Many issues need to be resolved by the organization as a whole. Aspects of organizational support include:

How is the service concept changing? How well are the internal interfaces managed?

o Manage internal relationships as well as customer relationships How important is resource management in the culture of the company

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o This is usually seen as a “low-level” task

Chapter 11 – Linking operation decisions to business performance It is hard to know how a change in the service delivery system affects business performance.

Relationships between operational decisions and business performance Cause-effect relationships are usually complex. Leading organizations are moving away from intuition based management to working at understanding links between decisions and results.

Drivers service delivery results

Chains of cause-and-effect Managers need to understand the chains of cause & effect between operational drivers and business performance so they know how to get response – and the most effective one – from their limited resources. There are some tools for this:

Results determinant framework Performance pyramid Return on quality Balances business scorecard Service profit chain Value profit chain Business excellence model

The service performance network There are direct and strong relationships between service delivery, financial performance and broader aspects of business performance (market share, customer satisfaction, etc.)

Managers need to know how these variables are related so they can have greater confidence in their decisions. Relationships may not be linear.

The service performance network Combination of 2 networks:

1. The results network 2. The drivers network

At the center lies the service delivery, concerning value (experience + outcome) of the service as perceived by the customer and/or the organization.

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The results network

Service delivery financial performance

Change in the service delivery may well represent increased costs to the organization

Improving processes, increasing staff, etc increased costs On the other hand, they may reduce cost in the long run Managers need to understand short- and long-term issues

Service delivery customer satisfaction

Customer satisfaction financial performance

Happier customers are willing to spend more for example More satisfaction = less dissatisfaction = decreased costs

Customer satisfaction retention & loyalty The nature of this relationship depends on the nature of the organization. If the

customer has experiences better service than earlier or better than alternatives, he/she is more likely to be loyal. This is sometimes referred to

as “defensive marketing”

Service delivery

Staff satisfaction

Customer satisfaction

Attraction

Retention/loyalty

Financial performance

Satisfied

Delighted

Extremely dissatisfied

Changing propensity to switch/stay

Loyalty

Interesting point!!

Monopoly services?

Competitive services?

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As can be seen from the figure, the only truly loyal customer is the totally satisfied customer. Degree of “lock-in” to a service depends on the nature of the organization (monopoly), switching costs (financial or penalty cost, time and effort), and substitutability (commodity type more easy to substitute than capability type).

Retention & loyalty financial performance

Long-term revenue Buy more Willing to pay more Lower marketing costs For organizations where retention is of vital importance, it should be used as a

key performance measure (NPS = % of promoters - % of detractors)

Retention and loyalty also applies to staff, e.g. lower costs for recruiting and training.

Customer satisfaction - - > attraction

Attract new customers through word-of-mouth

Service delivery attraction Attract new customer by having superior service delivery and advertising the improvements. This is called “offensive marketing”.

Attraction financial performance

Increased revenue and market share If revenue > cost, profit!

Service delivery staff satisfaction

E.g. less failures less complaints feeling of greater control less stress ……

Customer satisfaction customer satisfaction

“Satisfaction mirror”

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Staff satisfaction retention & loyalty

Less stress, attrition and absenteeism retention and loyalty

Staff satisfaction financial performance

Reduced absenteeism More productive

Staff satisfaction - - > attraction

Word-of-mouth new customers and, new, high-quality staff

Understanding linkages Not all linkages are valid to all organizations and situations, but by trying to unravel them, managers can start to understand the direct impact of changes.

The drivers network Drivers – the levers operations managers can apply to gain anticipated results. Key operational drivers are:

Process People Resources Networks, technology and information

These are in turn affected by several variables.

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Service performance network

Key stages in developing a network It is known to be high correlation between variables, but strength of these varies from organization to organization. To find the strengths, managers need to understand the nature and strengths of the relationships for themselves. This involves three main stages:

Create a service performance network model Identify the measures and Explore the linkages

Create a network The organization may not have resources to do it comprehensive directly. Start with the key variables. The value chain or the EFQM model can be used here.

Identify the measures Identify the measures, existing or required, for each variable in the network. For larger organizations, there will be a problem to find the data. Thus this should be an organization-wide initiative, requiring top-management commitment.

Explore the linkages Regression or graphic representation is powerful. Data collection must be done over time (relationships may not be linear).

World-class services World-class service organizations have superior business performance that is the result of superior process management, people management, resource management, and management of networks, technology and information. These results from clear vision, culture, strategy and concept, driven by good leadership. World-class organizations do not only understand these relationships, but also use them widely.

Characteristics of world-class service organizations They tend to have good results, both financial and non-financial (employee satisfaction, customer satisfaction, market share, etc.) They are imitated by others and recognized as benchmarks. What are the key characteristics that drive this success? There are 2 types of drivers: corporate level and operational level.

Service delivery

Processes

People

Resources

Networks technology and information

Vision

Concept

Culture

Strategy

Leadership

Staff satisfaction

Attraction

Financial performance

Customer satisfaction

Retention/ loyalty

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Characteristics at corporate level include (pp. 403-406):

Great leadership o The key to grate service is genuine “service leadership at all levels of the

organization” o Clear and purposeful leadership from top, which is emphasized and

enacted continually o Willingness to listen encourages communication in all directions o Belief in and investment in people, systems, training and the delivery of

outstanding service Clear vision

o Clarity about where the organization is going and an ability to communicate enthusiastically to others

o Vision created by great leaders provides the emotional energy require to deliver outstanding service and generates commitment to the provision of service

Clarity of concept o Clear concept! Well-defined, well understood by employees and customer,

and well communicated Supportive culture

o A positive attitude is generated by an organizational culture consistent with the declared competitive strategy and that values the contribution of all members

A well developed strategy o World-class organizations have clear plans in place that set out how they

will achieve their goals and their vision. Something concrete and achievable

Characteristics at operational level include:

Willingness to listen to customers o Use many methods to listen and take all comments very seriously. o Customer view used to drive development o World-class organizations are great at meeting both customer needs and

their own criteria for financial success, without compromise Continuous process development

o World-class service organizations firmly reject “me-too” service. Any changes are usually based on detailed research, but they also take risks and sometimes “take a flyer” when it feels right

o Equally, they are willing to drop an idea, if tan innovation is not seen to be working

Consistency of service o Great service companies couple the basics of service with the art of

surprise Responsiveness

o Staff encouraged to try to solve all problems, within reasonable limits, to satisfy customers

“A-can-do” attitude o In organizations, systems and processes often limit employees from what

can be done. In world-class companies, there exists effective means of

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both circumventing them (through empowered employees) and by allowing employees to challenge and change inappropriate and unhelpful systems and processes

Big and little thinking o Never loose sight of the “big picture” and at the same time pay attention to

details Supportive and committed staff

o World-class organizations use approaches as empowerment and self-directed work teams appropriately

o Right mix of recognition and reward systems Excellent performance management

o Key drivers are measured, service is carefully quantified and targets set in key areas of the business

o Results (financial and non-financial) are shared throughout the business o Targets not only based on what was achieved in the past but also on

activities of competitors and other organizations (maybe not even in the same field)

o Celebrate excellence and achievements Lack of complacency

o World-class organization never accept that they have reached their goals

Awards for excellence

Leadership

People

Policy & strategy

Partnerships &

resources

People results

Customer results

Society results

Processes

Key Performance

Results

Enablers (how) Results (what)

Innovation and learning (feedback to achieve continuous cycle of improvement)

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Chapter 12 – Driving operational improvement Performance improvement is an important aspect of performance management. All improvement processes focus on two key elements:

1. What adds value for the customer and the organization, and 2. How to mobilize employees to contribute to the improvement process

On thread that is common is involvement of everyone. This enhances the motivation of the people involved (Hawthorne studies). But this is not sufficient. Changes need to be made in process design, resource allocation, and reward and recognition systems.

Approaches to operational improvement Two types (differ in, among others, speed and amount):

Continuous incremental change Radical, step change

Continuous and radical change strategies

Continuous, incremental Radical, step Existing process Little change Redesign Improvement expected Modest Substantial Benefits attained Long-term Short-term Change driven by Employees Senior management Senior management time/effort

Small Substantial

Risk Small High Capital expenditure Small Substantial Use of information technology

Little Significant

There are 5 common approaches to change (both radical and incremental):

1. TQM 2. Six-sigma 3. Business process re-engineering (BPR) 4. Lean thinking 5. Benchmarking

TQM This is one of the best-known approaches to continuous improvement. It has major impact on organization by putting the customer at the heart of quality decisions and improvements. TQM is not a “program” or activity, rather it is good management practice. The two foundation stones of TQM are:

1. Customer focus a. Identify customers, understand their expectations, and ensure that all

systems, procedures, activities and culture are focused on meeting those expectations

2. Total involvement a. Create a culture of continuous improvement

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The three cornerstones of TQM concern people, systems and culture. People are responsible for and capable of driving change in the systems and this is encouraged by an appropriate people-centered, supportive and improvement-based culture.

Six-sigma This is also a continuous improvement approach. The main objective is 3,4 DPMO, 4,5 (+-) 1,5 Stdv.

Critics say that it is not economically viable to achieve the objective of six-sigma. The approach is worth considering for customer-critical processes – activities having significant impact on satisfaction. Usually, high-volume operations use this approach. Six-sigma consist of a set of tools and techniques. Moreover, six-sigma is more oriented to business results than TQM, and more training (MBB, BB, GB, etc…).

Six-sigma is a four-step system (according to some author):

1. Align – projects must be aligned 2. Mobilize 3. Accelerate – result oriented 4. Govern

DMAIC A challenge for organizations adopting six-sigma or other continuous improvement methodologies is to ensure that any training delivered as part of a change initiative is truly embedded in the organization’s culture.

BPR BPS is about the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance. Its main principles are:

A cross-functional approach o Most processes cut across functional boundaries, thus cross-functional

teams is a prerequisite to radical improvement Out-of-the-box thinking

o Traditional beliefs and views need to be challenged to allow total redesign starting with a clean sheet of paper

Simplification o Discard wasteful activities and focus on simplicity and logical ordering

Implementing BPR requires a high-level team with a champion (top-level) to coordinate action. It requires a clear understanding of current processes (facilitated by process mapping e.g.). Redesign is then a key activity.

Because of the emphasis on business processes, systems and structure, the “people factor” often gets overlooked, ignored or underestimated. Because of that, BPR has for many became synonymous with “downsizing”.

Lean thinking The essence of lean thinking is to clarify what adds value for the customer and/or organization and to strip out all other activities.

Eliminate waste

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Zero defects Pull instead of push Multifunctional teams Vertical information systems Decentralization of responsibility Continuous improvement

Main benefits include:

Reduces process times and/or lead times Reduced processing costs per item/customer through increased productivity Increased customer satisfaction Reduced costs resulting from a higher completion rate (baulking) Better communication with all the parties in the chain Reduced costs resulting from lower levels of complaints or enquiries

On major benefit is employee involvement. Value-stream is an extremely powerful and useful tool in lean thinking. It’s a process map with identification of value-adding activities.

Lean six-sigma, putting them together To get greater responsiveness through faster throughput (lean) together with the drive for better quality through reduced variance in service delivery (six-sigma), these two are used together. Some significant stumbling block to overcome (in most initiatives like this) are:

Not budgeting sufficient resources for implementation Ensure the measurement system will encourage the right behaviors Too many meetings

o “go-see” principle in Japan is a sound principle The challenge of standard operating procedures (resistance e.g.)

Benchmarking and improvement Continuous improvement usually involves benchmarking internally between similar processes and with past processes. Radical change adopters are very likely to adopt external benchmarks for setting performance targets because of the need to improve performance radically in relation to that of competitors.

Service recovery In all organizations, things will eventually go wrong! It is not surprising because service operations are usually complex human-based systems, with both employees and customers taking part in the process. Errors, mistakes and failures lead to complaints. Nowadays, complaints are increasing due to customer sophistication, decreased perceived quality and increased government information about rights.

Types of failures Failures and problems can be due to process (20 %), goods, equipment, facilities (27 %) or customers themselves (53 %). Those due to customers are either mistakes/errors or violations. From the customer’s point of view, a failure is any situation where something has gone wrong, irrespective of responsibility. What organizations need to recognize is that each failure provides an opportunity for recovery.

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Defining service recovery The purpose of service recovery is not to satisfy customers per se, but to use the information gained from a failure to drive improvement in the problem areas. Only satisfying customers not eliminating root cause. It is usual that customers get paid or promised that the problem has been fixed, “fobbing” them off.

Service recovery – the action of seeking out and dealing with failures in the delivery of service in order to improve delivery performance. Service recovery is not the same thing as complain management. This should lead to customer satisfaction, which in turn will lead to better financial performance.

The four acid tests of service recovery 4 tests to assess the recovery process’ success:

1. Does it lead to increased customer satisfaction? 2. Does it improve retention rates? 3. Does it drive process improvements? 4. As a result of the above, does it improve performance?

Customer satisfaction Good recovery is a key source of delighted customers.

Customer retention But, satisfaction is not equal to retention. Recovery can lead to retention for 2 reasons:

1. Good recovery high levels of satisfaction 2. Principle of reciprocity

a. Customer see that the organization has gone out of its way to sort out a difficult problem, so the customer may feel obliged to reciprocate this by not only staying, but also becoming a champion of the organization

Process improvement What really makes customer angry is not so much that they were not satisfied, but more because the process has not been changed to prevent future similar problems. It is important to take problem data from customer or staff and use it to improve!

Many organizations separate customer complain departments from “ordinary” operation, so that it does not disturb the rest of the organization. But this is moving away a key source of improvement information.

Staff are often left on their own to sort out problems stressed and negatively disposed staff, who feel powerless to sort out the problems (“learned helplessness)

Financial performance Effective recovery will lead to customer satisfaction, higher quality (if root cause eliminated), etc. This will in turn finally lead to increased financial performance. Service recovery and complain management could be seen as profit centers (and should not be seen as sunk cost).

Customer behavior How customers react to a failure might depend on:

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Type of person Attitude to complaining Perceived likelihood of successful redress Age Sex Most importantly, level or intensity of dissatisfaction

Satisfied, slightly dissatisfied customer might not do anything, whereas extremely annoyed/dissatisfied customers will complain, tell their friends, not use the service again, dissuade other, or maybe even turn into customer terrorists.

Why is this important? When recovering, you must take the level of dissatisfaction into account. It might even be more upsetting for the customer if you offer a furious customer a small token gesture.

Service recovery ingredients 3 essential ingredients:

1. Designing out failures 2. Excellent complaint handling 3. Proactive service recovery – seeking out problems

Designing out failures The best way of preventing failures and need for recovery is through “failsafing” (Poka yoke). Poke yoke has the advantage of being cheap; simple advises that can be used for both staff and customers.

5 key steps for designing out failures:

1. Identify potential/actual weak points in process a. Can be done by process mapping, walk-through audits, emotion mapping,

customer experience analysis or using results from complaint data 2. Identify type/nature of problem (service, equipment, customer) 3. Focus on type of problem, brainstorm about solutions 4. Select, design and implement appropriate poka yoke.

a. If the problem cannot be prevented, ensure that you have good complaint handling

5. Monitor and evaluate the effect. Repeat the steps if necessary

Excellent complaint handling Three key operational activities:

1. Dealing with the customer (5 key activities) a. Acknowledgement – do not dismiss the problem b. Empathy – try to see it from the customers point of view c. Apology – some organizations may not want to do so, because it might

open up for litigation. d. Own the problem e. Involve management – if the failure is severe, the customer might want a

more senior person to deal with it 2. Solving the problem for the customer (2 key activities):

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a. Fix the problem b. Provide compensation

3. Dealing with the problem within the organization (3 key activities): a. Find root cause b. Solve problem – if it is too expensive, put procedures in place to ensure

that staff know how to deal with the situation c. Provide assurance – tell the customer that the problem has been fixed

Proactive service recovery Most customers do not complain! Out of 100, 5 may complain, but 1000 people may hear about it!

To ensure feedback, complaints and helpful suggestions from customer, organizations may need to deal with the root cause of the problem (the problem of customers not complaining that is). Most people (50 %) do not complain because they do not believe that anything will happen. There are variety of ways to encourage feedback:

Comment cards o What did you like? o What did you not like? o Will you return? o Encouragement can be done through incentives (prizes, etc.)

Notices o Useful in explaining the process for making a complaint

Websites Staff feedback

o Front-office staff often have a hum about what the customers like and dislike.

Preventing issues becoming failures Front-office employees have great opportunities for preventing issues becoming failures, by:

Looking for signs (behavior, mood, looks, etc.) Looking for potential fail-points Checking if everything is OK (and meaning it!) Telling customer before they find out themselves Taking action in response to failures, not complaints

Service guarantees Service guarantee is an important means of driving change. The service guarantee can be seen as an extension of service recovery. A service guarantee – a promise to recompense a customer for service that fails to meet a delivered level – makes it clear for customer what they should expect. Service guarantees require the organization to formalize the service recovery process.

The four acid tests of service guarantees 4 tests to assess the guarantee process’ success:

1. Does it lead to increased customer satisfaction? 2. Does it improve retention rates?

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3. Does it drive process improvements? 4. As a result of the above, does it improve performance?

Customer satisfaction

Focusing on satisfying the customer Reducing perceived risk Creating a positive attitude

o Customer toward the organization Dealing with dissatisfaction

Customer retention By providing a service guarantee, the organization may retain customers who might otherwise switch because of perceived increased risk of purchase elsewhere.

Process improvement Like service recovery, service guarantees help identify fail-points. In the design stage of the guarantee, the organization is forced to confront its delivery and support systems to ensure that they will meet required standards. When invoked, the service guarantee provides valuable data (OBS! Using this data should be the reason for putting the guarantee there in the first place).

Financial performance Like service recovery, the guarantee will lead to a lot of things, which in turn will lead to improved financial performance. But, there might be an increase in cost due to compensation.

Downsides of the guarantee

They imply that the service may well fail Standards set in the guarantee may be higher than what the customers need, thus

unnecessarily increasing the cost of the service Cheating

Design of guarantees Three key aspects:

1. Design the promise a. Meaningful – what is valuable to the customer (market research?) b. Easy to understand – don’t “fool” the customers with pages of fine-printed

text! c. Explicit – what is being guaranteed? How much? d. Unconditional – “if it is suppliers fault (or weather) we will not pay” not a

good approach e. The payout

i. Too high cheating ii. Too low not worth invoking (the reason you has it in the first

place) problems hidden 2. Design of the procedure to invoke

a. Easy, non-threatening, clear and known by everyone 3. Using the information to improve systems and procedures

a. The key purpose (and most important), is to drive improvement

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Chapter 13 – Service strategy A great service company has a reason for being (strategy), which energizes the organization and defines the word “service”. A service strategy provides the intellectual frameworks and conceptual models what allow managers to identify opportunities for bringing value to customers and for delivering that value at a profit or within budget.

A strategy is only as good as its implementation. Three major components of strategy – market and competitive analysis, strategic choice and implementation – are important issues for service operations managers.

Service strategy Effective strategies are generally evolutionary rather than revolutionary. Real strategies evolve as internal decisions and external events combine to form a widely shared consensus for action among key members of the management team. Customer-facing staff have a key role in strategy development. They have vital information. They also have the task of “living the strategy”.

Defining service strategy Service strategy – the set of plans and policies by which a service organization aims to meet its objectives.

Strategy: harnessing five elements Five critical elements of strategy are:

1. The creating of corporate objectives a. Provides targets/goals for the strategy b. Partly the objective provide the motivation for change, but also set out the

size and speed of change c. In essence, the objective set out the parameters for change

2. An understanding of the environment a. Competitors b. Customers

3. The development of the service concept a. Identifies the proposed nature of the business b. “Service in mind”

4. The identification of performance objectives a. Provide a means by which a strategy is translated to operations language

5. Development of an appropriate operation a. People, processes, structure, performance measurement systems, supply

chain, etc…

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An iterative and continuous process

Strategy formulation is not a one-off project. The environment changes (both internal and external).

Planned or emergent strategies

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Service as competitive advantage Increasing competition, declining sales and more service-aware customers pressure to rethink and improve levels of service offered.

Competing on outcome and/or experience Some positions an organization can choose to take relative competitors are shown in the picture below.

Arrogant or complacent: professional services and medial organizations sometimes fall into this point.

World-class: few companies are here.

Failing: Companies that are here usually have failed because they failed to move along with changes in the environment.

Retaining customers in short-term: high-experience usually leads to high emotional switching costs. But if continuous for a long-time, this will diminish!

Large organizations may have different services at different points. It is important to identify them, since different points require different strategic approaches.

Understanding Perceived User Value (PUV) To understand how service(s) can be used as competitive weapons, managers must understand what is important to customers. PUVs – the criteria regarded by customers as being important and on which they will base their assessment of the organization and its services.

Operations affect PUVs directly (availability e.g.) or indirectly (brand e.g.). An example is provided in the picture below (for two supermarkets).

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By separating price from the rest of PUVs, managers can assess the possibility of competing by more than simply being cheaper or differentiated, i.e. competing in both ways. The example from above is also shown in the picture below.

It is important to understand which direction to adopt!

Turning performance objectives into operations priorities IMPORTANCE-PERFORMANCE MATRIX!

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Strategy formulation and development

Strategy drivers The driving forces may be external or internal.

Operations led strategy Externally driven strategy

o Competitors (environment) o Customers (service concept)

Corporate led strategy

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Visionary leadership Any of the previous mentioned drivers may be sufficient to begin the cycle of strategy formulation. The more drivers existing, the more pressure there is to move in the cycle. Visionary leadership has major impact on the strategy formulation process. Visionary leaders understand the current organization and its service – people, process, culture, etc. – and are able to create an attractive vision for the future. They are also able to communicate vision and enthuse others.

Key issues in strategy development 1. Objectives

a. Clear objectives based on drivers (internal or external pressure) b. Provide means of measuring and monitoring success or failure of the

strategy c. Questions:

i. What are the objectives? ii. Are they achievable?

iii. Are investments required? iv. Are there any contingencies?

2. Environment a. Need to understand the current/future environment to meet the

objectives b. A key outcome of this is the identification of potential target markets, their

needs and expectations c. Questions:

i. What are the characteristics of the markets or segments?

Present service Service

vision

Bring about change

Communicate & enthuse

Processes

People

Culture

Visionary leadership

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ii. Is the strategy appropriate for them? iii. What are the needs and expectations of customers in these

markets? iv. Etc…

3. Service concept a. Outcome b. Experience c. Identifies:

i. What customers and providers have in their mind ii. What operations have to provide and marketers market

iii. The degree of focus d. Questions:

i. What is the service concept? ii. Is it appropriate for that market?

iii. Is it even aimed at a particular market? iv. Etc…

Sustaining strategy Without constant appraisal of the changes to the internal and external environment and consequent adjustments to strategy, organizations may decay. This is called “institutional rusting”. The main operational difficulties in sustaining strategy are:

Conflicting objectives Inappropriate and inflexible operations processes and resources Inappropriate investment Undetected changes to the service concept The addition of multiple (similar) service products to a service process originally

designed for product

Chapter 14 – Service culture

Understanding organizational culture 2 schools:

1. Culture is tangible, can almost be written down a. In this sense, culture is something that the organization possesses.

2. Culture is much less tangible. a. Only really exist when people in the organization talk to each other and,

by their words and behaviors, act out the culture of the organizations. b. In this sense, culture is like “personality”, it is hidden and its impact is not

always obvious because there are a number of unspoken and/or unconscious aspects to it.

For service operations managers, the implication is that they must develop an ability to predict, and prepare for, the influence of culture.

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Basic assumptions and the service concept

“There is more to culture than you can see”. It is important to understand the connection between BUAs and the service concept. If there is a need to make a significant change to the service concept, the underlying culture will tend to revert to the original, preventing successful implementation.

Artifacts Structure, processes and other physical evidence that can be observed or felt by both customers and employees. We all draw conclusions on the things we observe. Measurement- and control systems are included here. It is very dangerous to draw conclusions from the evidence of the artifacts alone, without knowing the deeper levels of culture that may explain them.

Espoused values This is on the cognitive level. It describes the stated strategies and beliefs of the organization. Thus, this level may include aspects of the organization’s mission statement and statements as to the general values of guiding principles for the organization.

This aspect of culture again refers to the conscious level of human interaction and thought. Stated often that the espoused values are what the organization want to be.

A key aspect to espoused values are those aspects of an organization’s culture which might be interpreted as negative in the eyes of the outside world, e.g. 2 years up or out in consultancy firms. In the same way, the organization may have stated ambitions that are not borne out in practice.

Artifacts

Espoused values

BUA

Visible organizational structures and processes (hard to decipher)

Strategies, goals, and philosophies (espoused justifications)

Unconscious, taken-for-granted beliefs, perceptions, thoughts and feelings (ultimate source of values and action)

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It is the final level – BUAs – that holds the key to our understanding of why there might be observable differences between what is aspired to and what takes place in practice. It is helpful to be honest in statements.

BUAs Those unconsciously held views that are un-discussed and generally unchallenged. Basic assumptions are those beliefs and ways of working that have worked well for the organization in the past – and are indeed, its secret of success in the past.

These assumptions are often stated in a primitive way. It is this primitive aspect of the BUA that means that it is often deeply held and fiercely defended if anyone (often a new employee) challenges it.

Because BUAs operate at unconscious level, they are difficult to identify. Managers and employees may only recognize them when deeply help principles are challenged.

Culture can only be understood when the “unconscious” part of the organization’s personality is revealed. One of the most powerful ways to uncover key elements of culture is to provide a framework for members to discuss these aspects of their world and to begin to understand the various impacts on their behavior and, therefore, eventually on the service they may provide to the customer.

The cultural web is an instrument that provides a powerful framework for groups to begin to discuss aspects of the organization.

The cultural web

The paradigm The paradigm is essentially the way in which we view the world – the sets of values, principles and possible prejudice that inform our judgments. Another word used for this is “worldview”, which can be likened to the set of spectacles through which we view the world.

Symbols Power structures

Paradigm

Stories

Routines & Rituals Control

systems

Organizational structures

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An organization’s paradigm may have a number of facets:

A description of the sector of which the organization is a part The principal customer segments it seeks to serve (B2B, B2C, etc.) In some cases, the organization may express what it does in terms of what the

customers are buying rather than what the organization is providing Beliefs about what the organization think is good abut itself Some aspects of the way people think about the organization that is less positive:

ruthless, arrogant, etc.

There are overlaps between paradigm, SC and BUAs. It is critical to identify any inconsistencies between these three. It is also important to identify aspects of the paradigm that are helpful for service delivery as well as those which hinder it.

Organizations that believe that long-term customer satisfaction is more important than short-term profit will generally find a supportive environment for service delivery.

Organizational structures May e.g. be the organizational charts. Some questions to ask to understand this aspect of organizational culture are:

Hierarchical or flat? Organized geographically or by product areas? Function or process oriented? Bureaucratic or flexible? Based on teams or individuals?

The form of organization will determine to a large extent how responsive to customers it will be.

Power structures This aspect is important when wanting to change. Power structures may not have anything to do with the organizational chart. The importance of power structure as they relate to service delivery might be the negative power sometimes wielded by front-office employees. It would appear to delight some employees to withhold information from customer, because this gives them perverse satisfaction. If so, it might be because they feel so powerless and undervalued in the organization.

Leaders use a combination of personal charisma, expertise and positional power to bring about change. In bringing about change, it is important to find the power structures (10 % against, 80 % indifferent, 10 % pro). Find the 20 %, no matter what rank they have in the organization.

Control systems Control systems are the guiding infrastructure of the organization. What is of interest here is the identification of the control systems that have significant impact on the way things are done.

Performance measurement is at the heart of most control systems. Positive examples of this are companies that reward people for customer satisfaction performance above profit. Organizational control systems often lag behind what is desired to reinforce new behaviors.

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Routines and rituals These are activities that are not necessarily in the organization’s procedure manual, but nevertheless describe the way that the organization operates in practice. They might range from the informal system, through to celebration of success. Other routines and rituals may be less helpful, e.g. ritual hunt for scapegoat after failure.

The analysis of routines is extremely rich as it betrays much of the “under the surface” life of the organization. It gives a hum about how things really happen. When discussed honestly, routines may uncover things as how important decisions are made, how promotion is made, etc.

Symbols Symbols are the physical evidence of who or what is important in the culture, e.g. who has the biggest office, best parking space, etc. People usually don’t get happy when loosing values symbols during a change. Symbols may also be the human role models of the organization. The relevance for customer-focus may lie in how symbols became linked to service.

Stories Sometimes called “war-stories” and are generally told to new starters. In some organizations, they are positive, and in other negative.

Large organizations that have been through a change usually have stories about the “good old days”. Part of the process of influencing culture might be in creating a new set of stories linking heroic acts of customer service to success.

On the other hand, stories of staff who have been disciplined for giving relatively small refunds for poor service because they did not follow company red tape are extremely dangerous.

Using the cultural web Typical process for development and analysis of the cultural web is:

Develop a common understanding of the key elements of the current culture Examine current paradigm and decide what aspects would be desirable to change

to fit with the future strategic direction Identify mismatches between the desired paradigm and current elements of the

cultural web Develop action plans to influence or change where possible

It may seem impossible to change, but managers are a part of the power structure and able to influence their areas of the operation. The value of the cultural web analysis is that it is possible to identify means of changing aspects of the culture.

Identifying types of culture

The gods of management Different cultural environments exist within the same organization. There are a number of factors that influence this diversity, including individual personalities, nature of the role undertaken and extent of customer contact:

Zeus – the club culture

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o Ruling with patronage combined with fear o Frequently found in entrepreneurial organization and at the summit of

large organizations o Excellent for speed of decision-making. Such organizations can be very

effective when they are based on trust, but can be terrible places when an evil Zeus abuses his power

Apollo – the role culture o Rules and order. Stable and predictable – excellent when the market is not

changing rapidly Athena – the task culture

o Problem solver. Basis of this culture is expertise, not experience, age or position. This culture works well when the product is the solution to a problem. It is an expensive culture (due to expertise staff). When Athena organizations grow, they need Apollo to manage the routine activities

Dionysus – the existential culture o Emphasis is that the individual is in charge of his own destiny. In the other

three, the individual is there to help the organization. In this one, the organization is there to help the individual.

Thinking and learning

Influencing and changing

Motivating and rewarding

Zeus Trial and error Watching other Zeuses Learning by sitting with the “master” Admission of need to learn is a sign of weakness

Change by replacing people, not development Judged by whom, not what, you know Credibility is the key

Money is highly valued Reward is to be given responsibility and resources by Zeus Winning is crucial

Apollo Logical and analytical Acquisition of more knowledge and skills through training courses Appraisals and job rotation

Power from position, role or title Rules and procedures Managers implement directors’ decisions

Pensions schemes and career planning Increase in formal authority Status symbols

Athena Problem solving Brainstorming Learning as a team Opportunities for development

Persuasion through expertise Debate and consensus Problem definition Need a new problem to solve

Objectives, not role definitions Variety

Dionysus Learn by total immersion Give up, having mastered a new skill

Difficult to influence Unpredictable, need to negotiate

Opportunity to make a different in their terms Freedom

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There might not exist an “ideal” culture for service delivery. Service operations managers need to recognize the strengths and weaknesses of their organization and learn to adapt styles to suit their situation.

The “gods” and service delivery Number of ways these culture might impact on service delivery:

Zeus o Very responsive to customer, react quickly and harness resources to meet

current need o Particularly effective when a good relationship exist between chief

executives of the supplier and customer organization. Zeus recognize and admire other Zeuses

o Service delivery to these valued customers is likely to be of high quality Service delivery to other customers, seen as less interesting, may not receive same attention

o Tends to develop repeaters and strangers because Zeus has little interest in runners unless the appoints an Apollo to lead “business-as-usual” operations

Apollo o Extremely consistent in following procedures o Customers may experience them as inflexible o “I can’t do that” or “that’s more than my job is worth” attitude is the

downside of the reliability and efficiency they deliver o Drives on runners, tolerates repeaters, resists strangers

Athena o Flexible, and good at involving customers in the process of developing the

solution o Problem is that they get bored with the continual delivery of the same

service solution o Seeks the opportunity to develop new capability for strangers, tolerates

repeaters (in order to generate revenue) and resists runners Dionysus

o Nightmare as far as service delivery is concerned o Individuals only operate if task if of interest o Customer liable to be made to feel that they are somewhat inferior to the

service provider, and only taken on because they are an “interesting case” o Only interested in strangers, nothing else

The influence of national cultures on service delivery 4 dimensions that can be used to rate national culture:

1. Power distance a. High power distance would mean that employees are passive, have a

liking to be directed and inhabit a culture that generally expects superiors to wield power

b. Low in Western Europe, USA c. High in Asia

2. Uncertainty avoidance a. Evaluates the extent to which the culture encourages risk taking

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b. If high uncertainty avoidance – long hours, strict procedures..(Japan) c. If low uncertainty avoidance – more entrepreneurial spirit

3. Individual – collectivism a. Individualism in USA, Canada and UK

4. Masculinity – femininity a. Masculinity – emphasis on acquisition of money, material possessions and

on ambition. Managers are encouraged to press for ever increasing goals and objectives

b. Femininity – create a more collaborative environment

This has implications for the implementation of global operations strategies. Not only does it differ between countries, it differs within countries as well. At an organizational level, the organizational culture might be more influential, not least because the organization’s recruitment policies will tend to favor “people like us”.

Organizational culture has far more influence on behavior of senior management in global organizations. A key issue to be addressed is that of flexibility between the organizational values and the element of national culture. If organizational values are fundamental to competitive advantage, and they clash with national culture, the service will fail.

Management of change and service delivery

Strategies for cultural change 4 basic approaches:

1. Progressive (aggressive) a. Used when there is no time for a consultative approach b. Good when implementing rapid major change c. Bad in gaining commitment and ownership of results

2. Consultative a. Great deal of communication and involvement b. Good in gaining commitment and ownership of results c. Bad when implementing rapid major change

3. Educative (indoctrinative approach) a. The organization provides material and training to explain why the

change is necessary. Based on view that if people can understand the need for change, they will be happy to support it

b. Problem: i. People don’t react to change rationally

ii. The organizational “road show” is often seen as playing mind-games with the employees

4. Corrosive a. Akin to the organization’s grapevine. Senior management “lets loose” the

key messages at key points throughout the organization b. Favored by those who must manage groups of professionals

Most changes will contain elements of all 4 approaches. There are five parameters to assess the success of the change process:

1. Expressiveness

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a. The extent to which the change process communicates a new idea. What people call “hearts and minds”

b. New mission statement invaluable if senior management “walk the talk” 2. Commonality

a. The extent to which everyone speaks the same language and means the same thing

3. Penetration a. To what extent has the change really “got inside” the organization? Have

the routines and rituals changed? 4. Durability

a. Is it here to stay?

Pitfalls to avoid Actions to ensure success (and avoid some pitfalls):

Establish a sense of urgency Form a powerful guiding coalition

o Get both senior management and front-office staff on your side Create a vision Communicate the vision

o First-line supervisors/team leaders important in implementation. They have major influence on the employees

Empower others to act on the vision o Remove obstacles to change

Plan for and create short-term wins o Staff need to see credible success within 12-24 months

Consolidate improvements and produce still more change o Do not stop at first sign of success. If rituals has not changed, it is not

complete Institutionalize new approaches

o Demonstrate how new approaches and behaviors have helped to improve performance. Link change and success!

o Ensure that next generation leaders at all levels understand and deliver the new culture

Capacity for change Many change initiatives will fail due to being under-resourced. Change fails because managers do not have the capability to manage it. Organizations then need to recruit or buy this capability. Another common problem is that the organization doesn’t have the capacity to manage change as well as maintaining “business-as-usual”. The transition curve shows the individuals response to a proposed (enforced) change.

Managers need time to understand the impact on themselves, let alone those who work for them.

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Shock Here, it is important to answer questions as honestly as possible. Time must be set aside to be available for questioning, even if it seems as nothing is happening.

Denial Here, it is important to continue to reinforce the fact that the change will take place – to reiterate the business or market reasons for the change. It is also important to be careful about how the past is described (people are usually proud of what they have achieved). It is useful to have a “rite of passage”, letting people mourn.

Reality The point when it comes apparent that the change is going to happen. People will need encouragement, since they may not perform as well as they would like. Carrying out pilot studies will help build confidence and reduce resistance.

Integration Change is now a part of the organization. It is now easier to go forward rather than back, but be careful to not relax too soon.

Operation managers now must walk through the detailes of the culture, such as

Reward and recognition schemes Promotion criteria Internal routines

to ensure that the desired behavior are encouraged.

Reality

Denial

Shock

Time

Perceived competence

Integration

Usually 2 years