1. and Service Leadership
Chapter 15:
Organizing for
Change Management
and Service Leadership

2. Overview of Chapter 15
Effective Marketing Lies at the Heart of Value Creation
Integrating Marketing, Operations, and Human Resources
Creating a Leading Service Organization
In Search of Human Leadership
Change Management

3. Effective Marketing Lies at the Heart of Value Creation

4. The Service-Profit Chain (Fig 15.1)
Internal
External
Operating strategy and service delivery system
Employees
Loyalty
Satisfaction
Capability
Service Quality
Productivity and Output Quality
Service Concept
Target Market
4 - 7
Revenue growth
Customers
Service Value 3 2 1
Satisfaction
Loyalty
Profitability
Workplace design
Job design
Selection and development
Rewards and recognition
Information and communication
Tools for serving customers
Quality and productivity
Improvements yield higher service quality
and lower costs
Attractive value
Service designed and delivered to meet targeted customers’ needs
Lifetime value
Retention
Repeat business
Referral

5. Links in the Service-Profit Chain Table 15.1
Customer loyalty drives profitability and growth
Customer satisfaction drives customer loyalty
Value drives customer satisfaction
Employee productivity and retention drive value
Employee loyalty drives productivity
Employee satisfaction drives loyalty and productivity
Internal quality drives employee satisfaction
Top management leadership underlies chain’s success

6. Qualities Associated with Service Leaders
Understands mutual dependency among marketing, operations and human resource functions of the firm
Has a coherent vision of what it takes to succeed
Strategies are defined and driven by a strong, effective leadership team
Responsive to various stakeholders
Value creates through customer satisfaction

7. Integrating Marketing, Operations, and Human Resources

8. Reducing Interfunctional Conflict
One challenge is to avoid creating “functional silos”
High-value creating enterprises should be thinking in terms of activities, not functions
Top management needs to establish clear imperatives for each function that defines how a specific function contributes to the overall mission
The marketing imperative
The operations imperative
The human resources imperative

9. Defining the Three Functional Imperatives
Marketing Imperative
Target “right” customers and build relationships
Offer solutions that meet their needs
Define quality package with competitive advantage
Operations Imperative
Create and deliver specified service to target customers
Adhere to consistent quality standards
Achieve high productivity to ensure acceptable costs
Human Resource Imperative
Recruit and retain the best employees for each job
Train and motivate them to work well together
Achieve both productivity and customer satisfaction

10. Creating a Leading Service Organization

11. From Losers to Leaders: Four Levels of Service Performance (1)
Service Losers
Bottom of the barrel from both customer and managerial perspectives
Customers patronize them because there is no viable alternative
New technology introduced only under duress; uncaring workforce
Service Nonentities
Dominated by a traditional operations mindset
Unsophisticated marketing strategies
Consumers neither seek out nor avoid them

12. From Losers to Leaders: Four Levels of Service Performance (2)
Service Professionals
Clear market positioning strategy
Customers within target segment(s) seek them out
Research used to measure customer satisfaction
Operations and marketing work together
Proactive, investment-oriented approach to HRM
Service Leaders
The crème da la crème of their respective industries
Names synonymous with outstanding service, customer delight
Service delivery is seamless process organized around customers
Employees empowered and committed to firm’s values and goals

13. Dilbert’s Boss Loses Focus and His Audience Fig 15.3

14. Moving to a Higher Level of Performance
Firms can move either up or down the performance ladder
Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace
As a result, they may face difficulties attracting demanding new consumers with different expectations
Companies defending their control of their competitive edge may have encouraged competitors to find higher-performing alternatives
Organizations with a service-oriented culture may turn otherwise as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits

15. In Search of Human Leadership

16. Leading a Service Organization Involves Eight Stages (1)
Creating a sense of urgency to develop the impetus for change
Putting together a strong enough team to direct the process
Creating an appropriate vision of where the organization needs to go
Communicating that new vision broadly
Source: John Kotter

17. Leading a Service Organization Involves Eight Stages (2)
Empowering employees to act on that vision
Producing sufficient short-term results to create credibility and counter cynicism
Building momentum and using that to tackle tougher change problems
Anchoring new behaviors in organizational culture
Source: John Kotter

18. Leadership versus Management
Concerned with development of vision and strategies, and empowerment of people to overcome obstacles—make vision happen
Emphasis on emotional and spiritual resources
Works through people and culture
Produces useful change, especially non-incremental change
Management
Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving
Emphasizes physical resources—raw materials, technology, capital
Works through hierarchy and systems
Keeps current system functioning

19. Setting Direction versus Planning
A management process, designed to produce orderly results—not change
Setting direction
Involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal
Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy
“Stretch”—a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach
Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution
See Service Persp : Can Cirque du Soleil Stretch Further?

20. Individual Leadership Qualities
Possesses a special perspective
Able to believe in their employees and make communicating with them a priority
Love of the business
Being driven by a set of core value that they infuse into the organization
Need not be charismatic, but has to be principled
Must have personal humility blended with intensive professional will, ferocious resolve, and willingness to give credit to others but take blame themselves

21. Change Management

22. Evolution versus Turnaround (1)
Evolution involves continual mutations designed to ensure the survival of the fittest
Top management must proactively evolve the focus and strategy of the firm to take advantage of changing conditions and the advent of new technologies
Turnaround situations are where leaders seek to bring distressed organizations back from the brink of failure and set them on a healthier course
Example: Amex (Service Perspectives 15.2)
Can be advantageous to bring in a new CEO from outside the organization

23. Evolution versus Turnaround (2)
Hurdles that leaders face in reorienting and formulating strategy
Cognitive hurdles
Resource hurdles
Motivational hurdles
Political hurdles
Turning around an organization that has limited resources requires concentrating those resources where the need and the likely payoffs are greatest
Example: William Bratton’s 20-year police career in Boston and New York
A firm’s search for growth often involves expansion—even diversification into new lines of business
Example: IBM

24. Role Modeling Desired Behavior
“Management by walking around”
Provides insights to both backstage and front-stage operations
The ability to observe and meet both employees and customers, and opportunity to see how corporate strategy is implemented on the front line
Best Practice In Action 15.2
This approach may lead to a recognition that changes are needed in that strategy
A risk of prominent leaders becoming too externally focused at the risk of their internal effectiveness

25. Leadership, Culture, and Climate (1)
Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams
Effective communication is essential for a leader
Organizational culture
Shares perceptions or themes regarding what is important in the organization
Shares values about what is right or wrong
Shares understanding about what works and what doesn’t work
Shares beliefs, and assumptions about why these things are important
Shares styles of working and relating to others

26. Leadership, Culture, and Climate (2)
Organizational climate
The tangible surface layer on top of the organization’s underlying culture
Factors of influence:
Flexibility, responsibility, standards that people set, perceived aptness of rewards, clarity people have about mission and values, level of commitment to a common purpose
Creating a new climate for service, based on understanding of what is needed for market success, may require
Radical rethinking of HRM activities, operational procedures, and the firm’s reward and recognition policies

27. Summary of Chapter 15: Change Management and Service Leadership (1)
Service profit chain provides useful summary of behaviors required of service leaders to manage effectively
Marketing, operations, and human resource management functions need to be closely coordinated and integrated in service businesses
Four levels of service performance
Service losers
Service nonentitites
Service professionals
Service leaders
Service leadership is not based on outstanding performance within a single dimension, but must cut across marketing, operations and human resources

28. Summary of Chapter 15: Change Management and Service Leadership (2)
Leading a service organization involves eight stages
To be effective, leaders need to understand difference between leadership versus management, as well as setting direction versus planning
Transformation of organization can take place in two ways:
Evolution
Turnaround
Role modeling is one of traits of successful leaders
Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one