Service Operations Management: Improving Service Delivery 3 rd Edition. Robert Johnston and Graham Clark. FT Prentice Hall 2008

Transcription

1 : Improving Service Delivery 3 rd Edition Robert Johnston and Graham Clark FT Prentice Hall 2008 ISBN: , 552 pages Theme of the Book The focus of the book is service delivery and the objective is to help managers understand how service performance can be improved by studying service delivery and associated management issues in the service sector. This sector includes organizations in, for example, the public sector, voluntary sector, mass transport services, professional services, business-to-business services, retailers, internet services, tourism and hospitality. The same principles also apply to the provision of internal services such as personnel and IT. The book is intended as a textbook for those who want to build on knowledge of the basic principles of operations management. It can also serve as a handbook for operations managers in service organizations as they seek to develop and implement operations strategies

2 Key Learning Points Operations management is the art of creating and delivering value. Service and service delivery can be a competitive weapon. The service package is a combination of the service experience and the service outcome. The service concept focusing on experience, outcome, delivery mode, and value - is central to understanding customer requirements and focusing operations on those areas that have most impact on the customers perceptions. The ultimate test of service operations management is at the point of delivery to the customer and the aim is to delight customers within budget and at a profit not easy! Satisfaction is the result of customers assessment of a service based on a comparison of their perceptions of service delivery with their prior expectations. Service quality factors are those attributes of service about which customers may have expectations and which need to be delivered at some specified level. Service operations managers need to be able to manage the total chain of processes, which link together to deliver the service to customers or end users. It is possible for a service organisation to invest in meticulous process design and expensive technology but, having failed to invest in its Knowledge Interchange Book Summaries Page 2

3 people, it will not achieve the expected levels of customer satisfaction Managers need to try to understand the chains of cause and effect between their operational drivers and business performance so that they know how to get the most effective response from their limited resources. The service performance network is a framework to help managers do this. Knowledge Interchange Book Summaries Page 3

4 Contents PART ONE: INTRODUCTION 1. Introduction to service operations management 2. The service concept PART TWO: CUSTOMER AND SUPPLIER RELATIONSHIPS 3. Customer and supplier relationships 4. Customer expectations and satisfaction 5. Managing supply relationships PART THREE: SERVICE DELIVERY 6. Service processes 7. Service people 8. Resource utilisation 9. Networks, technology and information PART FOUR: PERFORMANCE MANAGEMENT 10. Performance measurement and management 11. Linking operations decisions to business performance 12. Driving operational improvement PART FIVE: MANAGING STRATEGIC CHANGE 13. Service strategy 14. Service culture 15. Operational complexity Knowledge Interchange Book Summaries Page 4

5 1. Overview of Service Operation Management Services operations management is the term that is used to cover the activities, decisions and responsibilities of operations managers in service organizations What is service operations management? Services operations management is concerned with delivering service to the customers or users of the service. It involves understanding the service needs of the target customers, managing the processes that deliver the services, ensuring objectives are met, while also paying attention to the continual improvement of the services. As such operations management is a central organizational function and one that is critical to organizational success What is service? Customers will judge the quality of the service on the basis of both the experience as well as the outcome. It is the role of service operations managers to manage and integrate both of those elements which together constitute the organisation s service package viz. Service experience: the customer s direct experience of the service process and concerns the way the customer is dealt with by the service provider Service outcome: the result for the customer of service delivery. Knowledge Interchange Book Summaries Page 5

6 1.3. The service concept The service concept is a critical element in knowing and defining what the organisation is selling and the customer buying. The critical objective is to ensure that what the organisation thinks it is providing correlates closely with what customers think they are receiving. As products and services are becoming more and more similar and as it becomes easier for organisations to copy others products and services, organisations are increasingly gaining competitive advantage through their total service concept. The service concept is defined as a shared understanding of the nature of the service provided and received which should encapsulate information about: The organising idea: The essence of the service bought, or used, by the customer The service experience: Which concerns the way the service provider deals with the customer The service outcome: The result of the service for the customer The service operation: The way in which the service will be delivered The value of the service: The benefit that customers perceive to be inherent in the service weighed against the cost of that service. Its value lies in bringing together the various elements of the service the operational elements, marketing emphasis and customer requirements to produce a meaningful overarching service definition in sufficient detail to provide a working service specification. A clear statement of what the customer is buying provides the focus for operational performance criteria and the identification of the key operational areas and the starting point for the development of an operations strategy. Knowledge Interchange Book Summaries Page 6

7 1.4. Service value To understand value, the costs to the customer have to be weighed against the benefits they perceive in the service. The task for operations is to find the Understanding and delivering perceived value is central to creating competitive advantage. right balance between maximising the value for customers and minimising the cost to the organisation. It is important to emphasis that the ultimate judge of value is the customer. The real test is perceived value whether the customers feel that they are receiving value, based on their own often intuitive and intangible criteria. The service concept is central to understanding customer requirements and focusing operations on those areas that have most impact on the customers perceptions. 2. Customers and Supplier Relationships Customers can be classified in several different ways viz. External versus internal customers Intermediaries versus ends users or consumers Stakeholders, payers, beneficiaries or participants Valuable and not-so-valuable customers. Operations managers need to: Recognise the different types of customer Understand the value of those different customer types Understand the different nature and needs of each group of customers Try to retain valuable customers Develop appropriate relationships with customers. Knowledge Interchange Book Summaries Page 7

8 Segmentation is a first critical step in developing relationships with customers enabling the organisation to understand the needs of particular targeted groups and frame the service package to satisfy those needs Customer retention A key task for operations managers, particularly in for-profit organisations, is retaining valuable customers and building long-term customer relationships. Capturing the lifetime spending of an existing valuable customer is much less costly than attracting new customers. Loyal and valuable customers are created by providing a level of service that satisfies or even delights customers Managing customer relationships Relationship marketing is about establishing, maintaining and enhancing relationships with customers for mutual benefit rather than seeing any and every service as a one-off transaction. Two main forms of relationship are postulated: Product relationships: which involve the capture of the customer using a variety of products e.g. loyalty schemes, frequent-flyer programmes, club cards etc and found particularly in higher-volume operations. Personal relationships: exist in many professional and low-volume, high-margin services, where there is time and value in developing one-to-one relationships with clients and customers and often involve key account management (KAM) approaches. Knowledge Interchange Book Summaries Page 8

9 The notion of relationship marketing, however, is not appropriate in every situation. For example, in commodity-based services many customers may be more influenced by value for money than by a concept as intangible as a relationship. On the other hand, in many business-to-business markets relationships are close, complex and long-term Customer expectations and satisfaction It is no accident that many of those companies that have a reputation for excellent service spend time and money in listening to customers. The purpose of trying to understand customers expectations is to try to ensure that service can be designed and delivered in order to meet those expectations. If operations meet those expectations then customers are satisfied with the service. Satisfied customers are more likely to become valuable customers who not only use the service again but may even recommend it to others Customer satisfaction Satisfaction is the result of customers assessment of a service based on a comparison of their perceptions of service delivery with their prior expectations. If customers perception of the service matches their expectations then they should be satisfied. Thus expectations and indeed perceptions are key components in delivering quality service. Consumer research has shown that excellent service is about doing two main things: Knowledge Interchange Book Summaries Page 9

10 Delivering the promise: this is about consistently doing what you say Dealing with problems and queries: this is about service recovery Plus: Providing a personal touch: this is about treating the customer as an individual Going the extra mile: this is simply about providing some small extra touches that the customer really appreciates. It is important to realise that excellent service can be delivered by a fullservice provider or a no-frills provider. Customers can be delighted by any organisation that does what it says and, when something does go wrong, sorts it out. Organisations need to understand expectations and, if appropriate, manage those expectations to keep them, as far as possible, at the right level that can be met or just exceeded by service delivery. This is a key challenge for service operations managers Service quality factors Service quality factors are those attributes of service about which customers may have expectations and which need to be delivered at some specified level. Many potential factors have been identified including, for example, access, availability, courtesy, flexibility, functionality, responsiveness et al. Although they may vary from customer to customer, service quality factors can be divided into four groups in terms of their ability to dissatisfy or delight viz. Knowledge Interchange Book Summaries Page 10

11 Hygiene factors: these need to be in place to avoid dissatisfaction but they are unlikely to be a source of delight. Enhancing factors: have the potential to delight if they are present, but there absence is unlikely to dissatisfy the customer. Critical factors: have the potential to both delight and dissatisfy. Neutral factors: have little effect on satisfaction Managers must know which factors will delight and which will dissatisfy in order to manage the creation of satisfaction during the service process. Service quality factors provide a base for understanding and defining customer expectations (whether internal or external), defining appropriate levels (i.e. create the quality specification) and also measuring customer satisfaction Managing supplier relationships This concerns the management of the relationships involved in service delivery to the end customer The Service Supply Chain Supply chain management (SCM) is concerned with managing the flow of information, materials, and services through the network of suppliers, internal and external, serving the ultimate consumer. The essential exchange mechanism is more accurate information about expected demand passed in appropriate format to upstream suppliers thus allowing them to manage their production with minimum cost. The theory is that the benefits of increased competitiveness will be shared equitably between the partners in the supply chain. Knowledge Interchange Book Summaries Page 11

12 The benefits of SCM include: Reduction in the total cost of inventory held by the chain as a whole Reduction in administrative overheads involved in managing multiple relationships Collaboration in scheduling and in process improvement, leading to higher service levels and quality improvement Faster response to changes in the market demand. 3. Service Delivery 3.1 Service processes Processes are the lifeblood of the service operation. A good process ensures that service is delivered consistently, time after time. Excellent service which satisfies the customer and meets the strategic intentions of the organisation is usually the result of careful design and delivery of a whole set of interrelated processes. Service providers that consistently meet both cost and quality targets manage the chain of processes from start to finish rather than simply the final stage of delivery to customers. A service process comprises many interrelated processes, some of which predominantly process customers, others information and others materials. Many tasks will be located in the back office remote from customers, while other front office tasks and activities take place in the presence of the customer at a variety of locations.. Together these processes in an appropriate sequence create the service experience and deliver the service outcomes. Service operations managers need to be able to manage the total chain of processes, which link together to deliver the service to customers or end users. Poor service often emanates from a lack of coordination between Knowledge Interchange Book Summaries Page 12

13 activities. Failure to manage end-to-end processes leads to inefficiencies across the organisation that comprise the service supply chain, leading to lack of consistency, poor reliability in terms of quality and lead-times, and increased cost Engineering service processes The key to good service design is about taking a customer perspective and understanding the whole service process. Several tools and techniques have been developed to design new processes or assess and improve existing ones viz Process mapping (for front and back office processes) Walk-through audits (for front office processes) Service transaction analysis (for front office Controlling service processes A key operational performance objective is to achieve consistency of outcome for customers most service organisations report that reliability is one of the most significant factors in influencing customer satisfaction in other words saying what you do and doing what you say. Many service operations utilise the statistical process control (SPC) methodology to assess the extent to which a process is capable, or in control. Quality systems such as ISO 9000 are also useful in focusing on the development of quality management systems that have the objective of creating processes that reflect customer requirements and are sensitive to changing market conditions. Knowledge Interchange Book Summaries Page 13

14 3.2. Service people From a customer perspective, the difference between a mediocre and an excellent service experience lies more often than not with the person who serves them their immediate point of contact. The person embodies the service and the customer s perception is influenced to a large extent by the way they view this interaction. It is possible for a service organisation to invest in meticulous process design and expensive technology but, having failed to invest in its people, it will not achieve the expected levels of customer satisfaction. Moreover, employees will not be motivated to own and improve service processes to deliver required levels of quality and productivity. Managing service providers is an important task because these people, individually and collectively, have a crucial role viz. they are responsible for delivering service to their customers (whether internal or external); they usually form a significant element in the service experience; employees represent significant resource for many service businesses and frequently represent the largest variable cost to the organisation; and the essence particularly of professional services lies in the skills, capability, and knowledge of the people who are in a real sense the service - in terms of the blend of their expertise and chemistry with the client that the customer id buying. Service managers must seek to motivate and support employees by providing inspirational leadership, harnessing the power of teams and teamwork across the organisation, and clarifying the roles of service providers..the organisation s overall culture the way we do things round here will also have an impact on the quality and effectiveness of the organisation s service offering. Knowledge Interchange Book Summaries Page 14

15 3.3. Resource utilisation Making the most effective use of operational resources materials, staff, equipment and process technology - is at the heart of service operations management and has a major impact on both operational costs and customer satisfaction Capacity management Managers are concerned with ensuring that the service process has sufficient resources to deal with the anticipated levels of customer demand in such a way that quality of service meets pre-set targets in the most cost-effective manner. This is a delicate balancing act because both underutilised and overstretched resources can be disadvantageous. The task of capacity management is to try to achieve a balance between too much and too little resource utilisation. Capacity management is concerned with putting a plan in place that makes the best use of resources given the forecasted or expected demand for services. Knowledge Interchange Book Summaries Page 15

16 4. Performance Management 4.1. Performance measurement Two useful tests of a performance measure are: Purpose: Four main purposes Communication: a measure informs employees as to what the organisation requires them to strive for Motivation: the measures used by an organisation influence employee actions e.g. if speed is measured but not quality, quality may be compromised for the sake of speed. Control: provision of feedback so that action can be taken to keep a process in control Improvement: providing information about how to manage better the process involved. Systems: what systems are in place to support or achieve the purpose? An interesting question to ask is: looking at the set of measures used by an operation, would its customers measure its performance in the same way? Measuring what is important to customers can easily be overlooked by organisations Organisations need to evaluate their performance on a range of measures, not purely financial or indeed operational. Financial performance measures would include share price, ROCE, costs and profits. Operational performance measures would include speed, productivity, equipment utilisation and staff absenteeism. External data would include market share figures, customers lost, customer satisfaction. Developmental needs of an organisation to learn, change and Knowledge Interchange Book Summaries Page 16

17 develop would be assessed through for example the quality and extent of training, research, communication, problem identification and problem solving. By using knowledge about the relationships between operational, financial, external and developmental performance measures organisations can become systematically smarter Target setting Target-setting is a key element of driving performance improvement there is evidence to suggest that performance improves when clearly defined targets are provided. Operations managers need to decide how targets will be set to support process improvement, control communication and stimulate motivation. There are essentially three types of targets viz. Internal based on past performance of the process under consideration; External based on comparison with other organisations e.g. best in class benchmarks; Absolute i.e. processes which need to be run with zero defects or 100% adherence to standard e.g. life support systems which may fail in practice with serious consequences but for which their operational targets are absolute. To motivate employees to try to reach a target level of performance it is essential that operators have some control over the variables that affect the performance and also it helps if they have had a role in negotiating what that target should be i.e. what they think is achievable. This approach encourages employees to address questions such as how can you improve what you are doing? How can you improve the process by which you are doing it? Knowledge Interchange Book Summaries Page 17

18 Rewards and penalties Organisations need to decide what rewards/penalties will be associated with the achievement of their chosen targets. If rewards linked to targets are to work as intended, they must be clearly perceived as sufficient to justify the additional effort to obtain them, directly related to the required performance, perceived as equitable, and must take into account the complexities of individual versus team-based effort Driving operational improvement One important aspect of performance management is performance improvement focusing on two key elements: what adds value for customers and the organisation how to mobilise service employees to contribute to the improvement process. Approaches employed include TQM, Six Sigma, BPR, Lean Thinking, and Benchmarking. Organisations also need to have service recovery procedures to deal with things that go wrong including excellent complaint handling Linking operations decisions to business performance Managers need to try to understand the chains of cause and effect between their operational drivers and business performance so that they know how to get the most effective response from their limited resources. The service performance network is a framework to help managers do this. Knowledge Interchange Book Summaries Page 18

19 The service performance network The service performance network is the combination of two networks: the results network and the drivers network and the relationships between them. The results network includes, for example, the following relationships viz. Improved customer satisfaction can have a positive impact on financial performance Customer satisfaction has a positive impact on customer retention. Customer retention and loyalty have a direct impact on profitability Organisations may attract new customers through recommendation from existing satisfied customers Greater staff satisfaction leads to greater customer satisfaction. The drivers network includes the following key operational drivers: Process People Resources Networks, technology and information. Research evidence suggests that the better an organisation manages its drivers, the better will be its results, including market share, customer and staff satisfaction, and profit. Knowledge Interchange Book Summaries Page 19

20 AUTHORS GRAHAM CLARK is a Senior Lecturer in Operations Management at Cranfield School of Management and Director of the Executive MBA Programme. He has substantial experience of working with international organisations across a wide variety of sectors. ROBERT JOHNSTON is Professor of Operations Management at Warwick Business School. Currently academic director of the Warwick Diploma in Service Leadership, he provides advice to a wide range of private and public organisations, drawing on his global experience in executive development with leading companies. Knowledge Interchange Book Summaries Page 20

21 Cranfield School of Management Produced by the Learning Services Team Cranfield School of Management Cranfield University 2008