CHAPTER 4 EVOLUTION OF INTERNAL MARKETING

CHAPTER 4 EVOLUTION OF INTERNAL MARKETING 4.1 Introduction The concept of internal marketing originally emerged from the services marketing literature (Berry and Parasuraman, 1992: 176). Initially a critical organizational concern was to get everyone in the organization involved in service encounters, resulting in the improvement of customer-employee interactions. However, the realisation of organizations in all industries that services are becoming a keydifferentiating factor has caused the internal marketing concept to broaden. The move of the internal marketing concept from being exclusively service-orientated to manufacturing organizations is justified by the significant role that services are playing in all types of business activities. Organizations across all industries recognize that services are becoming an important factor in all their business dealings to obtain a competitive advantage. Therefore, quality service is becoming vitally important in industries dominated by price competition because, without excellent service as a differentiator, organizations have to match competitors prices. Dunne and Barnes (1999: 192-220) claim that internal marketing has two primary focuses. Firstly, it should be designed to complement the external strategic marketing

115 efforts through personal interaction between employees and customers. Secondly, it should serve to develop and maintain a motivated and satisfied workforce that contributes to the organization s external marketing objectives, namely quality, productivity and efficiency. The adoption of internal marketing should take on a holistic management approach that concentrates on developing customer conscious-employees. Employees should be included in the development of the organization s products and services as well as in the proposed external marketing campaigns. Exposing employees to products, services and marketing campaigns ensures that employees especially in nonmarketing functions are educated, informed and prepared to perform the role of parttime marketers for the organization successfully. It helps employees to understand the objectives of the organization and at the same time provides the organization with the opportunity to ensure the delivery of their goods and services. It is essential to stress marketing roles in traditionally non-marketing areas such as production, inventory and technical support because not including employees across organizational boundaries in marketing activities can jeopardise organizations external marketing and long-term performances. Therefore, it can be said that unless internal exchanges between employees are effective, superior performance in the external market cannot be achieved. This chapter will provide the reader with insight into the origin and growth of the concept of internal marketing, and provide a structure to help recognize the activities, role players, prerequisites and barriers of internal marketing. Chapter four is divided

116 into four sections. Section one presents an historical overview of internal marketing as well as an interpretation of the concept of internal marketing. Section two provides a definition and the phases that are considered important for the implementation of internal marketing in the organization. Section three identifies the role players of internal marketing and concentrates on the prerequisites for internal marketing. The last section identifies four barriers that organizations encounter in implementing internal marketing. 4.2 Historical perspectives of internal marketing As early as 1976, internal marketing was suggested as a solution to the problem of inconsistent service delivery by Berry (Rafiq, 2000: online). One of the reasons for the slow adoption of this solution is the fact that no single unified concept of what internal marketing is, exists. Several explanations of the concept of internal marketing have been developed over a period by various authors. Sasser and Arbeit (1976) claim that internal marketing is related to functions that are traditionally regarded as human resources functions because the efforts of internal marketing are directed at recruitment, training, motivation, and retention of suitable service-orientated employees (Dunne and Barnes, 1999: 192-220). Two separate papers published in 1981 by Grönroos and Berry focused on the ideas of the impact of internal marketing on strategic marketing. In his paper, Grönroos

117 emphasised internal communications and attitude management as strategies to manage a customer-orientated service culture. He described internal marketing as a holistic management process to integrate multiple functions and formulated the following description of internal marketing: Internal marketing starts from the notion that employees are a first, internal market for the organization. If goods, services and external communication campaigns cannot be marketed to their internal target group, marketing to the external customer cannot be expected to be successful either (McGuire, 1999: 337). Berry on the other hand discusses internal markets and their effects on the structuring of service organizations (McGuire, 1999: 337). In 1987 Compton provided an extensive explanation of internal marketing by identifying several objectives of internal marketing initiatives, as being: to help employees understand and accept the importance of total quality performances in their interaction with customers; to help employees understand and accept responsibility for total quality performances in their interactive performances in the organization; to help employees understand and accept the mission, strategies, goals, services, systems and external campaigns of the organization; to motivate employees continually and inform them about new concepts, goods, services and external campaigns as well as economic results of the organization; to attract, train and retain employees best suited for the job (Dunne and Barnes, 1999: 192-220).

118 According to Day and Wensley (1983), employees are the organization s internal customers. This perspective of internal marketing implies that through internal marketing, organizations offer employees products that satisfy their needs while they contribute toward attaining the objectives of the organization. Products can be identified as jobs, attitudes, behaviours or values of the organization (Quester & Kelly, 1999: online). In 1990 Grönroos argued that the purpose of internal marketing is to motivate employees towards service mindedness and customer-orientated performances, using a variety of traditional marketing activities internally in a coordinated way. Internal marketing should be seen as the intra-organizational marketing of goods and services with the objective of promoting customer-consciousness amongst employees and motivating them to improve customer satisfaction through their interactions with customers (Dunne and Barnes, 1999: 192-220). According to Bak (1995), internal marketing should be seen as a communication process of developing a customer-conscious culture within the organization. Organizations should treat employees as partners in the organization which provide products and services to buying customers. Ideally, internal marketing should be a two way communication process between employees and management used to initiate a broad based participation decision-making process through teamwork within the organization (Quester & Kelly, 1999: online).

119 Payne (Quester & Kelly, 1999: online) suggests that external marketing techniques such as research, segmentation, the marketing mix and marketing activities must be utilised when developing a structured internal marketing plan. According to the above explanations of the internal marketing concept, internal marketing requires the development of an integrated employees activities programme that introduces employees into a work environment that is focused upon the goals of the organization and the role of the former in serving external customers, subsequently supporting the fact that employees should be viewed as internal customer groups. 4.3 Interpretation of the concept internal marketing If the focus of internal marketing is on the development of relationships between employees across internal organizational boundaries with the objective of adding value to external customers, then employees autonomy and know how should be combined to start an internal knowledge generating process which supports any internal activities that need to be changed. Organizations should always keep in mind that the purpose of internal changes is to enhance external marketing activities (Ballantyne, 1999: 43-60).

120 McGuire, (1999: 337) identified at least three interpretations or meanings of the internal marketing concept, namely culture or management philosophy, strategy and activities or processes. Culture or management philosophy - Internal marketing as a philosophy should be seen as a customer-orientated culture in which all employees understand the strategic intent and are motivated to participate in its implementation. The integration of front and backstage activities depends on a shared understanding of the organization s objectives and the desired outcomes thereof. Strategy - Internal marketing is also a strategy that identifies a product, target customers and capabilities. The products are the jobs organizations offer to employees and are made up of the job specifications, remuneration, employees motivation, along with the work environment that influences employees. Therefore, the attraction, selection, training, motivation and reward as well as the retention of good employees should be specified objectives of internal marketing (McGuire, 1999: 337). The target customers of internal marketing include all employees of the organization, namely top management, supervisors, contract employees and support employees. Two crucial strategies required for internal marketing are communication and attitude management. While communication management focuses on customer orientation and the service mindedness of employees, attitude management is associated with the human resources management of the organization (McGuire, 1999: 337). The successful implementation of

121 internal marketing in an organization is dependent firstly on it being an integral part of strategic management, secondly the support of internal marketing by the organizational structure and lastly the active support of internal marketing by top management. Activities and processes - Internal marketing processes or activities are found in most of the functions which have an impact on the service mindedness and customer consciousness of the organization s employees. The activities and processes of an internal marketing programme should be designed to select and develop suitable employees, create value for employees and contribute to enhanced service delivery to internal customers. These activities and processes should cultivate a belief in the organization s products and services, facilitate the delivery of products and services and emphasis the role of superior customer service. Value comparisons, incentive programmes, work environment, working conditions and customer focus are elements that should all be part of the internal marketing activities programme. In 1995 Gilmore and Carson identified the following internal marketing activities: the amalgamation of internal and external marketing strategies; the application of the marketing mix to internal customers; the use of marketing training and internal communication methods to sell employees on their role in the organization; the empowerment of employees to allow them to make decisions in relation to dealing with customers;

122 the development of managers and employees role of responsibility and crossfunction participation; the adoption of responsibility by the functions of the organization for internal marketing integration (Dunne and Barnes, 1999: 192-220). Because employees across all the boundaries of the organization are involved in the internal marketing processes, marketing activities should provide a clear sense of direction as well as emphasising the performances that external customers value, if employees are involved in the formulation of internal changes to policies and procedures. Increased value for external customers through superior service achieves profit and organizational growth, therefore internal marketing can be used as a primary means of achieving this competitive advantage. 4.4 Internal marketing defined According to Foreman and Money (Peck, Payne, Christopher, Clark, 1999: 313), internal marketing has not been subjected to extensive research, and nothing specific or substantial has been published on the subject of internal marketing in any major journals in the fields of marketing. Therefore, there is still no unified notion of what internal marketing is and exactly how it can be implemented in organizations. However, Rafiq (2000: online) identified five main elements of internal marketing, namely:

123 employees motivation and satisfaction, customer-orientation and customers satisfaction, inter-functional co-ordination and integration, a marketing approach and the implementation of general organizational strategies. Based on these elements, he developed a definition that meets the requisite components of internal marketing. Rafiq (2000: online) defines internal marketing as: A planned effort using a market like approach to overcome organizations resistance to change and to align, motivate and inter-functionally co-ordinate and integrate employees towards an effective implementation of corporate and functional strategies in order to deliver customers satisfaction through the process of creating motivated and customer orientated employees. In conjunction with the definition, he stresses that there are three phases that are crucial for the successful development and evolution of the internal marketing concept. Phase 1: Employees motivation and satisfaction - According to Rafiq (2000: online) the concept of internal marketing was developed to improve organizations service quality. Because of the belief that employees are responsible for inconsistent service delivery, internal marketing places the focus on them. Therefore, it can be said that organizations which strive to deliver consistent quality service to their customers need to emphasis employees motivation and satisfaction.

124 In 1976 Sasser and Arbeit (2000: online) contended that employees are the most important market of an organization. Organizations should view their employees as internal customers and their job offerings to employees as products and services. To motivate employees and encourage job satisfaction, organizations should devote the same care over job offerings to employees as over the products and services offered to external customers. In the services industry customers buy labour or human acts, therefore attraction, retention, and motivation of employees who are service-orientated and customer-conscious are key concerns, especially if services are the only differentiation between the organization and its competitors. Under these circumstances, internal marketing would be developed and implemented. Phase 2: Customer consciousness - Grönroos states that, if it is expected of frontline employees to be involved in interactive marketing, it is important that they are selected for their responsiveness to customers (Rafiq, 2000: online). Positive buyer-seller interaction is known to influence buying, repeat buying and customer loyalty. Subsequently customer-employee interaction provides organizations with quality marketing opportunities. However, organizations which want to take advantage of these marketing opportunities must use internal marketing as a tool to develop customer conscious employees (Rafiq, 2000: online). Effective service to customers depends on the effective co-ordination of job performances between frontline employees and backroom support employees. Internal marketing plays an important role in the integration of

125 functions across organizational boundaries and job performances are vital to the excellent customer relationships of organizations. Grönroos in 1985 stated in his original concept of internal marketing that the uses of marketing-like activities is the best method of motivating employees towards customer consciousness. George in 1990 supported this by suggesting that employees are best motivated for service-minded attitudes and customerconsciousness behaviour by an active approach where marketing activities are used internally (Rafiq, 2000: online). Phase 3: Strategy implementation and change management - Internal marketing can be seen as a holistic approach of management processes to the integration of multiple functions in an organization. It is also a concept that plays an integral part in the managing of the organization s human resources (Rafiq, 2000: online). In 1992 Glassmann and McAfee emphasised this by suggesting that internal marketing integrates the role of marketing and human resources to the extent that employees across all the boundaries of the organization become resources of the marketing function (Rafiq, 2000: online). Therefore, internal marketing can be used as a tool for successful implementation of organizational strategies, to overcome inter-functional conflict, achieve better internal communication, reduce departmental isolation and overcome resistance to change (Rafiq, 2000: online).

126 4.5 The role players of internal marketing Internal marketing occurs within the organization and should be recognized as a means of eliminating unnecessary levels in the organization as well as a tool to improve communication between management, employees and business units. Because internal marketing focuses on human aspects, it is important that the human resources department is recognized as an essential role player in the design and development of an internal marketing plan. The three principal role players of internal marketing are management, human resources management and employees activities. This section reviews the functions of these role players. 4.5.1 Management Gummesson stated that internal marketing can be practised in various circumstances such as marketing between internal suppliers and internal customers in an organization, application of employees knowledge across boundaries and between profit centres in a decentralised organization (Gummesson, 1999: 22-42). Subsequently internal marketing in a managerial context needs to be based on negotiations and is dependent on joint agreement between the organization and employees. It needs to focus on continuous value creation for all the participants based on the involvement of teams and individuals across functions, including management from all functions and levels of the organization.

127 Managerial interaction within an organization involves establishing, developing and facilitating co-operative relationships for mutual benefits between the organization and employees across all boundaries. This calls for face-to-face interaction between managers, individual employees, teams and communities of practice (Thomson, 1999: 208). This type of interaction occurs on a level where personal contact, negotiation, bargaining, and information exchange takes place. Managing complex interactions issues such as social exchange, dependence, satisfaction, commitment and adaptation to changes can be achieved with the application of internal marketing techniques. 4.5.2 Human resources Internal marketing can be viewed from two perspectives. It can be considered in terms of firstly, the benefits it delivers to employees and secondly, as the benefits it provides to the organization (Dunne and Barnes 1999:192-220). Traditionally human resources focus on the employee functioning for the benefit of the organization. Internal marketing also focuses on the benefits to the employee but primarily exists for the benefit of the employee. According to Nucifora (2000: online) marketers budget significant resources for communication with their external customers. Unfortunately, very few organizations invest the same time, energy and money in communicating with their internal customers. Because internal communications are traditionally seen as a human resources function, marketing functionaries are seldom called upon to apply their skills to internal marketing communication issues. It is

128 therefore essential that organizations be made to realize that internally marketed issues cover the entire range of matters as discussed in the following sections. 4.5.2.1 Human resources activities The human resources department plays a vital role in the design and implementation of an internal marketing programme. Human resources have the expertise in, as well as knowledge of the work requirements in the organization therefore they should be a partner in the organization s internal marketing strategy, design and execution. Through the appropriate application of human resources, organizational excellence can be pursued. Therefore, human resources should act as a campaigner for employees, representing their concerns, while exerting to increase employee s contribution and commitment (Dunne and Barnes, 1999: 192-220). Human resources also play a role in the continuous transformation and shaping of processes and culture that improve the organization s capacity for change. A cooperative plan between human resources and marketing is therefore required to guarantee the successful management of strong market-orientated tasks such as shaping the vision, leading change, creating and communicating shared needs, and mobilising employees commitment to organizations. Human resources plays an active part in competing for the right talent, offering employees a vision, preparing employees to perform, stressing team play and leveraging employees freedom.

129 4.5.2.1.1 Compete for the right talent Hiring the right people to perform the service is a key factor for successful service and internal marketing. Unfortunately, many service organizations have low standards when hiring service employees. A principal cause of poor service delivery is the recruitment, hiring and retention of employees who are not customer conscious; therefore organizations should aim high and use multiple methods to recruit the right employees (Berry and Parasuraman, 1992: 176-191). Rational internal marketers are unrelenting in their search for talent therefore they strive to develop and supply human resources with ideal candidate profiles for each position, interview numerous prospective employees and offer the best remuneration packages. This exercise ultimately results in improved productivity, superior service quality and lower employee turnover. 4.5.2.1.2 Offer a vision The attraction, development and retention of quality employees require the communication of a clear organizational vision to all employees. Top management s involvement in the communication of the organization s vision is vital. To ensure that employees believe in the goals and values to which they contribute, it is essential that they know and understand how their job product fits into the broader spectrum of the organization s vision. Therefore the importance of the role employees commitment to organizational goals and values in the success of an organization must be communicated to all employees at every opportunity, preferably by top management.

130 4.5.2.1.3 Prepare employees to perform Employees are often ill-prepared for their roles in the organization. They may receive too little training or not the right kind of training. On the other hand, they may receive adequate training but their contribution to value in the broader spectrum of the organizations is not clear to them. Therefore it can be argued that those whom managers perceive as unmotivated employees are in fact unconfident employees. Organizations can overcome this problem by using middle managers as teachers or mentors, because these are often the people to whom employees are exposed on a daily basis. Existing middle managers should be encouraged and motivated to take on the role of teachers, reinforce on an ongoing basis what they teach and be able to lead by example (Berry and Parasuraman, 1992: 176-191). Subsequently organizations need to take employees teaching abilities into consideration when they promote them. Learning and skills development not only boost the confidence of employees but also the confidence of the managers under whom they work. Organizations which are committed to developing the skills and knowledge of their employees will develop a reputation for investing in their employees and will reap the benefits in the long term. 4.5.2.1.4 Stress team play Service work is demanding, stressful, frustrating and sometimes demoralising. It is thus important for service employees to know that they can rely on the support of a

131 team (Berry and Parasuraman, 1992. 176-191). For service employees to come through for their customers they must know that the organization will come through for them. Service teamwork requires lasting team membership, regular team contact, good team leadership, shared goals and team performance rewards. 4.5.2.1.5 Leverage freedom Organizations often have policies and procedures in place that limit employees freedom to perform their jobs. These undermine employees confidence and stifle their personal growth and their creativity within the organization. As a result, they deliver rigid service when tailor-made service is what customers demand. Good internal marketing gives service employees the opportunity to create customised service and achieve value for their customers. The empowerment of employees is not an easy process and managers do not always welcome it (Berry and Parasuraman, 1992: 176-191). However, for most employees the freedom to create, be innovative and do the right thing for customers adds richness and dignity to their work. Filtering authority downwards requires effort, determination and patience; therefore organizations should invest in training programmes that teach their employees values and not just rules. Managers should also be included in the training programmes so that they gain the confidence to widen the boundaries of their employees freedom to allow them to provide excellent service to customers. The goals of performance measurement and reward systems should be to encourage employees creativity and initiative on behalf of the

132 customers, because without the employees the goals of internal marketing are obsolete. In this regard it is essential for employees to know the extent of their performance measurement and that the results will be used to their advantage. Service performance is difficult to separate from the performer, therefore service performance can only be as good as its performer. If employees do not meet customer expectations, neither does the service. Customers inside an organization are represented by all those employees who rely on the roles and functioning of other employee to perform their own duties. Therefore internal marketing needs the involvement, input and expertise of the human resources professionals of the organization as role players in internal marketing. 4.5.3 Employees In 1987 Judd observed that the concept of the employees as an element of an organization s marketing strategy was absent from the marketing literature despite the fact that research by organizational behavioural specialists linked employees satisfaction and retention directly to customer satisfaction and retention in both service and product-orientated industries (Peck et al., 1999: 8). Today also there is strong evidence that employee retention, specifically amongst frontline employees adds to customer retention (Peck et al., 1999: 8). Employers therefore want to attract the best employees, keep them and become the employer of choice (Peck et al., 1999: 8). It is therefore the extent to which organizations can recruit, train, develop

133 and retain suitable, qualified, competent and motivated employees that will determine their future success in the internal market (Peck et al., 1999: 302). 4.5.3.1 Internal marketing components impact on employees The essence of internal marketing lies in the utilisation of activities that improve internal communication and enhance customer consciousness among employees to impact on external marketing performances. Although very little literature about how internal marketing techniques influence and affect employees is available, several authors have identified various components of internal marketing which have an impact on the employees in organizations (Hogg and Cartes, 1999: 110-124). Berry (1981) views employees jobs as internal products and the workforce as internal customers to each other (Varey and Lewis, 2000: 110-124). Grönroos (1990) draws a distinct line between tactical and strategically approaches of internal marketing (Varey and Lewis, 2000: 110-124). He argues that on a tactical level internal marketing should focus on ongoing training, encouragement of formal and informal communication systems and internal marketing segmentation of employees. However, he states that on a strategically level, internal marketing is dependent on supportive management styles, customer service training and marketing planning procedures. Tansuhaj et al., (1991) suggest that any internal marketing programme should adopt a holistic approach between human resources management and marketing and Ballantyne (1997) points out that internal marketing develops and influences customer consciousness among employees (Varey and Lewis, 2000: 110-124).

134 4.5.3.2 Employees participation Organizations and employees can adopt different strategies to influence the nature and level of involvement in internal marketing processes. Employees can support the organization by co-operating with the implementation of internal marketing or they can be troublesome and fail to act within the guidelines of internal marketing (Foreman, 1999: 125-138). Employees who identify more with customers views, or create uncertainty by pursuing their own objectives, negatively affect the organization s efforts to meet goals. In such circumstances organizations need to adopt strategies to manage the levels of employees participation because organizations which support and encourage employees participation in activities will find that employees are more motivated and understanding of the organization objectives and difficulties (Foreman, 1999: 125-138). 4.5.3.3 Customer satisfaction The achievement of customer satisfaction is the central theme of any marketing strategy. Organizational profit and growth are directly related to customer loyalty and customer satisfaction, therefore, the organization s aim should be to satisfy customers. Barnes in 1989 observed that the interpersonal component of customer service in service organizations influences customers perceived service quality and satisfaction (Quester and Kelly, 1999: online). Employee attitude and behaviour influence customers perception of the quality service they expect, therefore, it can be said that employees attitude, service consciousness and service orientation

135 influence the perceived quality of service from the customers point of view. However, those employees who are not in direct contact with the customers also influence the outcome of the service experience, because their attitude towards the frontline service providers directly influences the quality of service the latter give. It is therefore vital that all employees are made aware of the importance of their interaction with internal as well as external customers of the organization. 4.5.3.4 Employees as internal customers Organizations realize that success in the new economy is dependent on the interaction of employees not only with the external customers but also within the organization. Therefore, Grönroos claims that it is not enough to have customer conscious employees for effective service delivery, but that it is also important to have coordination between the frontline employees and back office employees (Peck et al., 1999: 315). Thus, the term internal customer was created, meaning that every employee in an organization is both a customer and a supplier to other employees. Internal marketing should be seen as an effort to achieve synergy between various functions to enable employees to work across functional borders to meet the external customers needs and expectations (Peck et al., 1999: 315). Organizations which undertake to provide value to their external customers can achieve this through the creation of value for their internal customers. Components such as employee selection and development, employee reward and recognition, internal communication, workplace designs and job design should be seen as integral

136 components for developing internal customers satisfaction within the organization. Improvement in internal customers satisfaction encourages employees to invest more of themselves in their job performances and they become part-time marketers of the organization (Dunne and Barnes, 1999: 192-220). All employees in an organization are part of the process that connects the organization and customers in the service encounter. Therefore, it is vital that internal exchanges must operate effectively along the entire service chain for organizations to achieve success in the external market. Because organizational growth and profits are derived from customer loyalty, the service chain establishes a relationship between external customer loyalty and internal customer satisfaction (Lings, 2000: online). However, customer loyalty is derived from the services provided to customers by employees who are responsible for the delivery of quality services and products to customers. In the eyes of customers, employees represent the service quality of the organization, therefore, the value of employees as organizational resources must not be underestimated. 4.6. Prerequisites for successful internal marketing The development of internal marketing began when it was clear that marketing concepts and strategies focusing on the external customer were no longer sufficient to achieve organizational goals and objectives (Strauss and Hoffmann, 1999: 141-159). Marketing concepts directed exclusively at external customers will fail if

137 employees lack customer-conscious attitudes and behaviours, and if internal systems and processes are not focused on customer-conscious objectives. The successful implementation of internal marketing is dependent on prerequisites such as communication, managerial competencies and knowledge and organizational culture. Each of these prerequisites will be discussed in more detail. 4.6.1 Communication George (1990) defined employees communication as a process that should ultimately influence the knowledge, attitude and behaviour of all targeted employees to improve work performances and achieve organizational objectives (Strauss and Hoffmann, 1999: 141-159). On the knowledge level, employees must be informed about the organization s customer needs, products, services, concepts, strategies and business initiatives. The primary concern of the attitude level is the creation of customer and serviceconscious employees. It is also focused on winning understanding for management decisions, identification with the organization and a cohesive attitude toward economic and social issues. The influence of knowledge and attitude become evident on the behaviour level when employees act responsible and independently to find customer-conscious solutions, acquire and share knowledge across functional borders and contribute to internal organizational processes.

138 Customer contact employees need clear, well-defined internal operating conditions and incentive structures according to which they can perform their jobs. The fast, ever-changing competitive factors such as customer needs, product life cycles and technological innovations have resulted in the absolute necessity of providing employees with information in a manner that is targeted, fast and tailored to their needs. It is therefore essential that organizations take the following three factors in consideration if they want to develop successful communication channels throughout the organization. Firstly, the target group of employees and the communication methods used to reach and motivate them are of critical relevance. Secondly, the communication exchange relationship between management and employees on different levels within the organization must be planned and managed effectively and thirdly, because employees behaviours and attitudes influence the quality of the service as perceived by the customer, the development of customer conscious employees should be a principal goal of internal marketing (Strauss and Hoffmann, 1999: 141-159). A detailed discussion of these factors will follow. 4.6.1.1 Methods of communication Organizational introspection concludes that if the inside of an organization does not work the chances of delivering to the outside is slim (Thomson, 1999:136). It is important that internal marketing should start with the internal relationships between senior management and internal customers. If internal customers do not experience relationship marketing, they will not understand it or be motivated to apply it in their interactions with external customers. Organizations which acknowledge their

139 employees as internal customers, who should be treated with respect, can confidently use the organization s internal culture, personality, skills and values to improve relationships with external customers. Thomson implies that good communication applied in an organization can add to its success (Thomson, 1999:138). Organizations can use three communication methods to communicate with employees and build relationship in the organizations. The three methods of communication in organizations are top-down communication, bottom-up communication and side-to-side communication. However, it is the successful application of side-to-side communication that adds value to a successful internal marketing plan (Thomson, 1999: 136). Top-down communication Top-down communication is determined by an organization s hierarchy and structure (Puth, 1994:17). It is a command and control strategy based on an approach that assumes that the dissemination of information from management to employees is an adequate communication system. Organizations favouring top-down communication rely on management to be the connection between the organization and employees. The information judged by those at higher level as important to those at lower levels must be transmitted. However, this communication method often results in the withholding or distortion of information by managers at higher levels of the organizations (Thomson, 1999:95). The goal of top-down communication is to provide employees on lower levels with instructions and guidelines on the expectations of their work

140 performances. However, the message is often withheld or distorted at a very high level and employees at the bottom of the organizational layers as well as management on middle and lower levels are affected by this (Puth, 1994:17). Organizations which want to implement internal marketing must realize that minimising their management layer structure will abridge and improve their communication processes. 4 Bottom-up communication - Employees in organizations which rely on bottom-up communication often feel that their needs are ignored by the organization because, bottom-up communication does not filter upwards successfully in the communication system. Reasons for the failure of bottomup communication are confusion of the employees, conflict between the organizational layers and poor methods used to deliver messages (Thomson, 1999: 101). The goals of bottom-up communication is to deliver progress reports, initiate specific requests or inform top management of problems experienced with top-down instructions, as well as to convey of new ideas resulting from work experience (Puth,1994: 17) It is essential that bottom-up communication firstly prioritise all messages, secondly, transmit clear, comprehensible messages to all intended recipients, and lastly, spell out the value of the message for the organization s purposes. Another reason for bottom-up communication failure is the fact that not enough attention is given to these messages by higher-level management. Internal marketing stipulate that employees should be treated as internal customers, therefore, internal marketing will ensure that management attend to messages from lower levels

141 of the organization and therefore are able to establish the needs of internal customers before they provide them with products or services (Thomson, 1999: 143). Side-to-side communication - Side-to-side communication is the communication processes between individuals, teams, departments, divisions, as well as people working together across the globe to add value to the organization (Thomson, 1999: 145). Side-to-side communication allows employees across all functional boundaries to communicate with each other. It is about employees in the organizations conversing, working, producing, buying, distributing and selling the organization s products and services to each other. Organizations realize that well-informed employees are the key to organizational success in a highly competitive environment (Puth, 1994:39). Side-to-side communication involves communication between peers, therefore, it occurs at every level of the organization. Internal markets identify everyone in the organizations as a buyer as well as a supplier to each other. Subsequently they are also responsible for the marketing of their specific products and services to each other. Individuals take responsibility for marketing themselves, their products and services to their team and other departments. Teams take responsibility for marketing themselves to other teams and departments. Departments take responsibility for marketing themselves to their own division and other divisions. Divisions market themselves to other key players in the customer

142 supply chain. A key benefit of side-to-side communication is cross-functional integration. This is vital because organizations realize that narrow functional thinking suppress creativity and innovation. Side-to-side communication creates desires, passion and other emotions of the emotional capital that is used to drive intellectual capital. It conveys the message that employees are valued by the organizations and their involvement in organizational processes is essential to the success of the organization (Puth, 1994: 77). If all employees in an organization work together to deliver products and services, the internal and external customers get what they want, when they want it and most important how they want it. It provides the organization with opportunities to deliver quality services and products to internal and external customers. 4.6.1.2 Communication application With ever increasing competition in the business environment customer consciousness becomes the central business focus with organizations acknowledging internal marketing as a critical success factor. Internal marketing encourages employees to become more customer conscious and promotes employees commitment to the organization. Internal communication plays a vital role in the success of internal marketing as its function lies in mediating the required skills and related information needs in the organization. Internal communication instruments cover an extensive area and consist of the influence of knowledge, attitudes and behaviours of internal customers on different organizational levels. Lee (2001; online) has identified eleven key factors on which the successful application of

143 internal communication depends. These factors are explained in the ensuing sections. Strategic orientation - Communication is an organization's lifeblood (Lee, 2001: online). The fundamental purpose of communication in an organization is to enable and energise employees to carry out its strategic intent. Organizations need the rapid capability to identify, send, receive, and understand strategic information that is credible, sensible, and relevant. However the successful execution of strategies or cultural changes in an organization requires the broad awareness, understanding and acceptance by employees of the strategic intent to ensure their commitment. Integrity and integration - Communication must at all times be credible, therefore organizations need to maintain constant and complete consistency between communication content and processes in the organization and the conduct of these. Building communication credibility requires the integration of an organization's formal, semi-formal, and informal voices and the support and commitment of all participants involved. Dignity and respect - Successful communication requires mutual dignity and respect from all participants. These factors are essential building blocks for relationships of trust and accountability within the organization. Good internal relationships will result in internal commitment from employees that will be

144 difficult for competitors to match. Organizational success ultimately depends on the efforts of its employees. Therefore, communication that builds relationships of trust and accountability among employees is imperative to the success of the organization. Flow of strategic information - Lee (2001: online), states that information is the currency of communication. Just as the flow of money creates wealth for organizations, so does the rapid and steady flow of strategic information within the organization enriches and empowers employees. The flow of credible, sensible, timely and relevant information throughout the organization must be encouraged and sustained, so that all employees are aware of its strategic intent. This communication process requires extensive commitment of leadership, application of appropriate technology, and the comprehensive participation of employees. The flow of strategic information through an organization is an indication of its ability to compete successfully within its industry. Clarity and power of messages - The absence of clarity in the communication process leads to confusion among participants. Communication must consist of clear and powerful messages that do not conflict with other messages (Lee, 2001: online). Messages must strike a balance between simplicity and complexity and should be delivered in the language of ordinary employees in everyday conversation. Therefore, messages that address the concerns and needs of listeners should take the form of a conversation, rather than a lecture or

145 announcement. Finally, clear and powerful messages should be coherent, consistent and complete. External perspective - An organization's internal communication systems require an understanding of the role players of the external environment, namely customers, competitors, and suppliers, as well as the communities and governments of its operating environments. Individuals and teams who participate in the implementation of a communication strategy must understand not only the strategy but also the reasons for it and the measures of its success. A communication system that is developed in conjunction with the organization s external environment provides useful information in a rational context. Roles and responsibilities - A high-performance communication system within the organization depends on the timely, energetic, and capable participation of employees throughout the organization. Since each employee within the organizations has a role or multiple roles in the communication system, it is essential that they all have clearly defined responsibilities for top-down, bottomup and side-to-side communication in accordance to their position. These responsibilities should explicitly address both the receiving and sending of information and should specify what information ought to be communicated, to whom, when, how and why (Lee, 2001: online). A healthy communication environment should encourage and reward employees for active communication within the organization, regardless of the information or message they communicate.

146 Listening and visible presence - A communication system cannot succeed without listening. Good listening is more than polite silence and attention when others speak. It can be identified as a high order virtue, a value, and a reflection of belief that learning what other people have on their mind is a wise investment of one's time. It requires intellectual humility and the willingness to learn from people across all boundaries of the organization. It can therefore be argued that communicators who maintain a visible presence will not only learn by listening, but will also establish a rapport with fellow employees that builds relationships of respect and trust necessary for frequent, honest and rapid communication (Lee, 2001: online). Training - Organizations which acknowledge employees vital role in communication processes must ensure that all employees have the capability, the tools, and the support to fulfil their responsibilities in this regard. The nature of communication training will depend on the specific needs of individuals, teams and the organization and should focus on providing everyone with the capability of communicating competently and comfortably. Structure and process - The ultimate purpose of communication systems is to enhance the business performance of the organization. The structure and process of internal communication should therefore reflect the fact that communication is a means, not an end, when it comes to success (Lee, 2001: online). The successes of communication systems are largely dependent on the ability to enable and energize employees to reach the organizations objectives.

147 The responsibility and tools for communication processes should be distributed throughout the organization, so that each employee is an integral part of the process, thus building relationships with other individuals, teams and business units. Measurement systems - The measurement of a communication system should concentrate on its effectiveness with respect to successful change, relationships, work performances and organizational growth (Lee, 2001: online). However the best measurement processes should not only address formal communication but also semi-formal and informal communication. They should therefore also measure employees across the boundaries of the organization s awareness, understanding and acceptance of, and commitment to, the communicated message. 4.6.2 Organizational culture Suter (2000: online) claims that culture, or more specifically "organizational culture, is a topic that entered the academic literature in the late 1970s. Zammuto and Krakower in 1991 defined culture as the patterns of values and ideas in organizations which shape human behaviour and its artefacts. Suter (2000: online) on the other hand, defines organizational culture as the pattern of shared values and beliefs that help individuals to understand organizational functioning and thus provide them with norms for behaviour within in the organization. In 1989 Deshpande and Webster claimed that because organizational culture consists of beliefs and values developed

148 by and within the organization, culture is not something the organization "has" but rather a notion of what it "is (Suter, 2000: online). 4.6.2.1 Integration of internal marketing into the culture Generally, internal marketing is seen as a concept concerned with creating, developing and maintaining an internal service culture that in return assists and supports the organization s goal and objectives (Peck et al., 1999: 313). Organizations realize that cultural changes do not happen overnight and that they are difficult to implement. However, they also realize that change is imperative for the successful development of a new and more customer-conscious organizational culture. George argues that the successful implementation and recognition of any change in organizational culture requires top management participation and endorsement (Suter, 2000: online). The successful integration of internal marketing into the overall organizational culture requires top management to take responsibility and advocate their belief that it will contribute to organizational growth, low employee turnover, low training costs, and the opportunity to develop shared goals and values throughout the organization (Suter, 2000: online). The successful integration of internal marketing into organizational culture is also dependant on the acknowledgement of top management that internal customers exist at every level of the organization. The communication of the belief from top

149 management that customers exist both inside and outside the organization, establishes an organizational norm which all employees can share. Employees now have norms for behaviour in the organization, which can bring about a change in the organizational culture. Schneider and Bowen claims, that when employees identify with the values and norms of an organization, they are less likely to leave and their service values and norms are transmitted to new employees (Peck et al., 1999: 309). The attitude of employees towards an internal service culture reflects how service and customer-oriented they are. It is also an indication of how they will react to new, unforeseen and awkward customer situations (Peck et al., 1999: 313). Because an organization s culture affects employees attitude and behaviour, it is critical for the success of internal marketing that the organization focuses on the development of a customer-conscious culture. It should be acknowledged that between top management and the actual service providers there are various other employees, management and non-management, who both impact, and are impacted on, by organizational culture. It is critical that each of these individuals recognizes that he/she also has an interest in the organization. Gummesson suggests that each employee should see himself/herself as a customer of colleagues, receiving products, documents and messages from them (Suter, 2000: online). Conversely, employees should see themselves as suppliers to other internal customers. It is as important to deliver high quality services to the internal customer as it is to deliver them to the external customer, because only when customers are satisfied - it is the satisfied customer that counts

150 irrespective of whether he/she is external or internal - has a job been properly executed. 4.6.3 Managerial competencies and knowledge For internal marketing to work in practice, individual managers need to have competencies and knowledge that relate to both long-term and short term planning as well as the ability to put them into practice within a working environment. Management competencies will become more refined and specific depending on the managerial situation and context in which they will be used. Simultaneously managers need to develop experiential knowledge (Gilmore,1999: 75-92). 4.6.3.1 Managerial competencies for internal marketing The successful implementation and sustaining of internal marketing is dependent on management s competencies in relationship building. Core managerial competencies that are suitable for internal marketing include dealing with peers, decision-making under conditions of ambiguity, conflict resolution, information processing, resource allocation, leadership, entrepreneurship and introspection. Competencies that are useful for building relationships (such as people management and networking) will therefore play a more substantial role in internal marketing situations (Gilmore, 1999: 75-92).

151 Service organizations need to acknowledge the importance of managing interactions between frontline employees and customers. Managers need to adopt a participative management style and allow frontline employees discretion in the performance of their job, so that they can meet customers expectations and take advantage of interactive marketing opportunities (Berry and Parasuraman, 1999: 176-191). The managerial challenge lies in finding frontline employees who do their utmost to meet customers needs. Customer contact employees are not only frontline employees but also those employees who act as part-time marketers for the organization. Managers need to examine carefully which marketing techniques are appropriate and how they will adapt them to meet the organization s needs. This implies that changes in any strategy will require internal marketing to motivate employees towards the required behaviour and to overcome organizational apathy. 4.6.3.2 Managerial knowledge for internal marketing Experiential knowledge is a combination of the existing knowledge, experience, communication and judgement of managers (Gilmore,1999: 75-92). Existing knowledge require a clear understanding of specific details and requirements of the job, organizational markets, competitors and customers. Managers gather knowledge through their business activities and in the industry in which they operate. Managers will, therefore, have knowledge about the processes and activities needed to integrate business responsibilities and the impact thereof, as well as knowledge

152 about the interdependencies and conflict between employees, business units and functions. However, existing knowledge in internal marketing is about not only the organization and the market in which the organization operates, or the competitors and their threats, but also about informants, networks and how these help to serve the external market. Managerial experience is more difficult to describe and access. It is the width and depth within which the manager operates in the organization. The depth relates to the circumstances of working in the same area for a time and allows for detailed, concentrated involvement in, and understanding of, tasks and responsibilities. From an internal marketing point of view this will include experience of building relationships with key informants and internal networks using the attributes that work best, and lessons learned from past. Width allows managers to translate their previous experience to existing issues at hand and contribute to overall development within the organization. They use the opportunity to experiment, try new ideas and learn from occurrences from outside the internal environment. Variety of experience is important in developing openness, confidence, vision, and flexibility in the organizational situation. It is important for managers to know which communication approach within the organization works best (Thomson, 1999: 94). They need to know what information to emphasise, when to emphasis it, which audience will be most receptive and, most important, how to provide the key role-players with this information. Accordingly, managers must have the ability to recognize specific information that should be

153 communicated to peers, subordinates and superiors. Judgement refers to the ability of managers to bring together all the features of knowledge, experience and communication and judge how best to take a decision in a specific circumstance. Experiential knowledge takes into account the internal and external changes in circumstances as well as the growth and development of management responsibility. Managers in each functional area need to develop core competencies and experiential knowledge in relation to their functional purposes and roles to suit or match their job requirements. 4.6.3.3 Managerial implications of internal marketing Managerial interaction and relationship building in the organization influences the managerial implications of internal marketing. Therefore, supportive senior management is vital to the success of internal marketing as it indicates to all employees the importance that the organization attaches to internal marketing (Rafiq, 2000: online). Managers need to pay attention to the communication of strategies and objectives to employees to enable them to understand clearly the importance of their role in the achievement of organizational objectives. Zeithaml claims that frequent, quality and accurate communication between managers and employees reduces the role ambiguity of employees and increases overall job satisfaction (Rafiq and Ahmed,

154 1999:). It is important that managers establish the appropriate communication medium suitable for the particular organization or situation. Managers should see jobs as products designed with features that employee s value. Therefore employees job satisfaction increase (Rafiq and Ahmed, 1999:). Treating jobs as products forces managers to handle jobs with the same care as they devote to the products they sell to external customers. In order to obtain maximum benefit from employees' job performances, marketing and human resources departments need to be equally involved in job design specifications, especially if the job requires customer contact. 4.7 Barriers to internal marketing Structural changes within an organization are usually the result of development, growth, managerial moves and decision-making internally as well as changes in the external environment. Organizational structures have often been criticised as being stifling to individual employees in an organization, therefore organizations attempt to, reduce the number of managerial levels, improve managerial accountability and move the decision making level closer to external customer interface level are important. Internal marketing is a tool that should be used to improve inter-organizational relationships and the interaction needed to implement changes. However, barriers to

155 developing and sustaining effective internal marketing exist, such as resistance to change, inter-functional conflicts, intra-functional conflicts and lack of individual practices (Gilmore, 1999: 75-92). These barriers are discussed in the subsequent sections. 4.7.1 Resistance to change According to Kotler, organizations suffer from a built-in resistance to change (Gilmore, 1999: 75-92). The resistance to change is initiated by factors such as the reluctance of management and employees to consider new ideas, managers fear of loss of power, fear of the unknown, loss of job security or lack of promotion opportunities. Generally, managers want to protect their stake in the departments or teams that they lead and fear that change can lead to the loss of control of these. Change also creates a level of managerial uncertainty, particularly where individual managers have to accept a level of decision-making with which they are unfamiliar. Frontline employees often resist change, if they perceive management of the organization as being too far removed from the actual activities and operational deliveries to understand the real issues of importance. The greater the change, the more difficult it is to implement, therefore the successful implementation of new plans and ideas depend on the active involvement of managers.

156 4.7.2 Inter-functional conflicts Management is often unaware of problems and issues that constrain the organization s internal co-operation and integration. Inter-functional conflict occurs when one or more functions in an organization fail to recognize that other functions have different priorities and perceive various issues differently. Subsequently, different departments will have varying views of other functions. If internal functional relations are not managed in an effective manner, functionally organised organizations can work against themselves resulting in inefficient performances. 4.7.3 Intra-functional conflict When organizational and departmental goals are different from employees individual and personal goals, intra-functional conflict occurs. Individual employees have different goals, desires and ambitions that impact on their overall attitude and behaviour in their work environment. When a limited number of opportunities are available for a large number of employees, employees can become so competitive in their work-related activities that it can lead to secretive practices. Work possessiveness entails not sharing information and knowledge and this causes poor communication between individuals within departments and business functions. Individuals want to be acknowledged as the initiators of good ideas and therefore will play down the contributions of their co-employees. These actions lead the development of a blame culture, where individuals are linked to inefficiencies and personality clashes that interfere with best work practices.

157 4.7.4 Lack of individual responsibilities Lack of individual responsibilities manifests itself in an organization s when employees or managers are required to make decisions, but are unable or unwilling to make them. Organizations face the challenge of finding individuals within the organization who can take action and finish tasks successfully. These individuals need to know how to communicate at all levels with peers, supervisors and subordinates, therefore they need to have a clear understanding of where they fit into the organization s processes and to identify with their duties and responsibilities. Receptiveness to change is an important attribute for an organization in successfully overcoming these barriers to change and in implementing and applying internal marketing strategies. Specific managerial competencies are required if internal marketing processes are to be used to help integrate organizational goals. Therefore, managers need to have the competencies to enthuse and inspire the whole team, especially if they are involved in the initiation of change. It is vital that managers who are responsible for the implementation of new activities are included in the planning and design stages of the action plan. Because relationships, interdependencies and interaction all have an impact on the organization s decision-making processes, changes in organizational directions and purposes will have an impact on the nature of decision-making in the organization. For that reason the recognition and use of communities of practice and informal networks are essential, if internal marketing are to be accepted within the organization.

158 4.8. SUMMARY Internal marketing is fast becoming a prerequisite for successful external marketing, therefore internal exchanges between the organization and its employees must be functioning effectively before the organization can be successful with regards to its external markets. Customer-consciousness impacts significantly on an organization's external marketing if it is permeates throughout the organization. Subsequently, internal marketing will be most effective if it becomes part of management s beliefs and value structure that represent the basis of organizational culture. Internal marketing is the implementation of a human resource management philosophy based on a marketing perspective. The internal marketing concept is best applied to service-mindedness when traditional marketing activities are used internally. The effect of customer-consciousness on the quality of the organization and its service outputs needs to be conveyed to employees. This is especially important in service organizations, since they cannot easily differentiate their services on the basis of mere technical quality, therefore they recognize that, as the intangibility of the service offering increases, there is a greater need to pay attention to the details of service delivery. An internal marketing programme, which focuses on the importance of customer consciousness, helps employees to realize that, because they are the external customers' only contact with the organization's services and products, they become the organization from the external customers' perspective. Employees performance shapes the service outcome and therefore they become part of the organization's "products".

159 Accordingly, the idea of internal marketing should originate at the top and be communicated down to the very bottom of the organization. Obvious issues of internal marketing are the internal communication of corporate culture and goals, mission and vision statements and employee policies and procedures. Organizations benefit form internal communication initiatives between specific functional areas such as: the marketing function introducing employees to new products, manufacturing function communicating their plant and capital improvements and finance function informing employees about new acquisitions. Most companies fail in the internal marketing stakes because they simply forget to appreciate the importance of commitment to internal marketing. Internal marketing firstly demands commitment to the process from all employees within the organization. Secondly, it requires openness to the extent that traditionally protected information is shared with employees on all levels. Thirdly, it calls for the acknowledgement that an organization's employees are the best word-of-mouth advertisement because, if they truly understand and appreciate the company's initiatives, they will be the best promoters of, and advocates for those initiatives. An internal marketing programme can also be viewed as a cultural initiative that demonstrates appreciation for internal and external customers of an organization. Internal marketing helps organizations to recognize the value of their employees because of the more intense employee focus created by it. Subsequently, the recognition employees receive from the organization by being treated as internal

160 customers is carried over to their interaction with external customers. Internal marketing is intended to develop a service and customer-orientated culture that dominates the processes of the organization. Therefore, it is important to engage the creativity of all employees in changing the organization to develop an essential sense of ownership of the organizational culture. Creating external customer value is essential for the creation of genuine customer relationships. The same value creation process must be followed with employees, because the same value-relation perception that exists in the external customers also exists within employees. Value must be viewed from the employees perspective and not from top-down management processes. Sources of value for employees are information sharing, facilitation of job performance, autonomy, remuneration, internal service culture, image of the organization, empowerment, and communities of practice involvement.