Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Chapter 11 Managing People for Service Advantage

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage  Frontline is an important source of differentiation and competitive advantage. It is:  a core part of the product  the service firm  the brand  Frontline also drives customer loyalty, with employees playing key role in anticipating customer needs, customizing service delivery and building personalized relationships

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Boundary Spanning Roles  Boundary spanners link the inside of the organization to the outside world  Multiplicity of roles often results in service staff having to pursue both operational and marketing goals  Consider management expectations of restaurant servers:  deliver a highly satisfying dining experience to their customers  be fast and efficient at executing operational task of serving customers  do selling and cross selling, e.g. “We have some nice desserts to follow your main course”

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Role Stress in the Frontline  Person vs. Role: Conflicts between what jobs require and employee’s own personality and beliefs  Organization vs. Customer: Dilemma whether to follow company rules or to satisfy customer demands  Customer vs. Customer: Conflicts between customers that demand service staff intervention 3 main causes of role stress:

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Emotional Labor  “The act of expressing socially desired emotions during service transactions” (Hochschild, The Managed Heart)  Three approaches used by employees  surface acting  deep acting  spontaneous response  Performing emotional labor in response to society’s or management’s display rules can be stressful  Good HR practice emphasizes selective recruitment, training, counseling, strategies to alleviate stress

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E The Cycles of Failure, Mediocrity and Success Too many managers make short-sighted assumptions about financial implications of:  Low pay  Low investment (recruitment, training)  High turnover human resource strategies Often costs of short-sighted policies are ignored:  Costs of constant recruiting, hiring & training  Lower productivity & lower sales of new workers  Costs of disruptions to a service while a job remains unfilled  Loss of departing person’s knowledge of business and customers  Cost of dissatisfied customers

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Cycle of Failure (Fig. 11.1)

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Service Sabotage (Fig. 11-A) Customary-Private Service Sabotage Sporadic-Private Service Sabotage Customer-Public Service Sabotage Sporadic-Public Service Sabotage ‘Openness’ of Service Sabotage Behaviors Covert Overt ‘Normality’ of Service Sabotage Behaviors Routinized Intermittent e.g. Waiters serving smaller servings, bad beer or sour wine e.g. Talking to guests like young kids and putting them down e.g. Chef occasionally purposefully slowing down orders e.g. Waiters spilling soup onto laps, gravy onto sleeves, or hot plates into someone’s hands

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Cycle of Mediocrity (Fig. 11.2)

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Cycle of Success (Fig. 11.3) Source: Heskett and Schlesinger

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E How to Manage People for Service Advantage? 1.Hire the right people 2.Enable your people 3.Motivate and energize your people Staff performance is a function of both ability and motivation. How can we get able service employees who are motivated to productively deliver service excellence?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Hire the Right People “The old saying ‘People are your most important asset’ is wrong. The RIGHT people are your most most important asset.” “The old saying ‘People are your most important asset’ is wrong. The RIGHT people are your most most important asset.” Jim Collins

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Recruitment  The right people are a firm’s most important asset: take a focused, marketing-like approach to recruitment  Clarify what must be hired versus what can be taught  Clarify nature of the working environment, corporate values and style, in addition to job specs  Ensure candidates have/can obtain needed qualifications  Evaluate candidate’s fit with firm’s culture and values  Fit personalities, styles, energies to the appropriate jobs

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Select And Hire the Right People: (1) Be the Preferred Employer Create a large pool: “Compete for Talent Market Share”  What determines a firm’s applicant pool?  Positive image in the community as place to work  Quality of its services  The firm’s perceived status  There is no perfect employee  Different jobs are best filled by people with different skills, styles or personalities  Hire candidates that fit firm’s core values and culture  Focus on recruiting naturally warm personalities

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E  Observe Behavior  Hire based on observed behavior, not words you hear  Best predictor of future behavior is past behavior  Consider group hiring sessions where candidates given group tasks  Personality Testing  Willingness to treat co-workers and customers with courtesy, consideration and tact  Perceptiveness regarding customer needs  Ability to communicate accurately and pleasantly Select and Hire the Right People: (2) How to Identify the Best Candidates

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Select and Hire the Right People: (3) How to Identify the Best Candidates  Employ Multiple, Structured Interviews  Use structured interviews built around job requirements  Use more than one interviewer to reduce similar to me effects  Give Applicants a Realistic Preview of the Job  Chance to have “hands-on” with the job  Assess how the candidates respond to job realities  Allow candidates to self select themselves out of the job

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E  The Organizational Culture, Purpose and Strategy  Promote core values, get emotional commitment to strategy  Get managers to teach “why”, “what” and “how” of job.  Interpersonal and Technical Skills  Both are necessary but neither is sufficient for optimal job performance  Product/Service Knowledge  Staff’s product knowledge is a key aspect of service quality  Staff need to be able to explain product features and to position products correctly Train Service Employees

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Factors Favoring Employee Empowerment  Firm’s strategy is based on competitive differentiation and on personalized, customized service  Emphasis on long-term relationships vs. one-time transactions  Use of complex and non-routine technologies  Environment is unpredictable, contains surprises  Managers are comfortable letting employees work independently for benefit of firm and customers  Employees seek to deepen skills, like working with others, and are good at group processes

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Control vs. Involvement Model of Management  Information about operating results and measures of competitive performance  Rewards based on organizational performance (e.g. profit sharing, stock ownership)  Knowledge/skills enabling employees to understand and contribute to organizational performance  Power to influence work procedures and organizational direction (e.g. quality circles, self-managing teams) Source: Bowen and Lawler Control concentrates 4 key features at top of organization; Involvement pushes them down:

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E  Suggestion involvement  Employee recommendation  Job involvement  Jobs redesigned  Employees retrained  Supervisors facilitate  High involvement  Information is shared  Employees skilled in teamwork, problem solving etc.  Participate in decisions  Profit sharing and stock ownership Levels of Employee Involvement

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E Motivate and Energize the Frontline  Job content  Feedback and recognition  Goal accomplishment Use the full range of available rewards effectively, including:

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E The Inverted Organizational Pyramid (Fig. 11.5) Frontline Staff Top Mgmt Middle Mgmt Legend: = Service encounters, or ‘Moments of Truth.’ Traditional Organizational Pyramid Inverted Pyramid with a Customer & Frontline Focus Customer Base Frontline Staff Middle Mgmt & Top Mgmt Support Frontline

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E The Wheel of Successful HR in Service Firms (Fig. 11.6) Leadership that:  Focuses the entire organization on supporting the frontline  Fosters a strong service culture with passion for service and productivity  Drives values that inspire, energize and guide service providers 1. Hire the Right People 3. Motivate & Energize Your People 2. Enable Your People  Be the preferred employer & compete for talent market share  Intensify the selection process  Empower Frontline  Build high performance service delivery teams  Extensive Training  Utilize the full range of rewards Service Excellence & Productivity