Chapter 15

Organizing for Service Leadership

Customer-Led versus Market-OrientedPhilosophies of Management

• Firms may lose market leader position if listen too closely to current customers• Service leadership requires curiosity, risk taking• Customer-led businesses focus on understanding expressed desires of

customers in currently served markets• Market-oriented businesses commit to understand current/ latent customer

desires plus competitors’ plans, capabilities

– Scan market more broadly, have longer-term focus– Work closely with lead users (windows to future vs.

anchors to past)– Combine traditional research with experimentation,

observation• Conclusion: Pursue customer satisfaction, but set limits on being led by

customers, especially during rapid change

The Service Profit Chain (Fig. 15.1)

Loyalty

Service Quality

Productivity& OutputQuality

EMPLOYEES

Capability

Satisfaction

ServiceValue

CUSTOMERS

Satisfaction Loyalty

RevenueGrowth

Profitability

Operating strategy andservice delivery system

Serviceconcept

Target Market

Internal External

• Workplace design• Job design• Selection and development• Rewards and recognition• Information and communication• Tools for serving customers

Quality and productivityimprovements yieldhigher service qualityand lower costs

• Lifetime value• Retention• Repeat business• Referral

Causal Links in the Service Profit Chain (Table 15.1)

• Customer loyalty drives profitability and growth

• Customer satisfaction drives customer loyalty

• Value drives customer satisfaction

• Employee productivity and retention drive value

• Employee loyalty drives productivity

• Employee satisfaction drives loyalty and productivity

• Internal quality drives employee satisfaction

• Top management leadership underlies chain’s success

Integrating Three Functional Imperatives(recap from Chapter 1)

Customers

Marketing Imperative

Human Resources Imperative

Operations Imperative

Defining Three Functional Imperatives• Marketing Imperative

– Target “right” customers and build relationships– Offer solutions that meet their needs– Define quality package with competitive advantage

• Operations Imperative– Create, deliver specified service to target customers– Adhere to consistent quality standards– Achieve high productivity to ensure acceptable costs

• Human Resource Imperative– Recruit and retain the best employees for each job – Train and motivate them to work well together– Achieve both productivity and customer satisfaction

Reducing Intra-Organizational Tension

• Transfers and cross training• Cross functional taskforces• New tasks and new people• Process management teams• Gain-sharing programs

The Search for Synergy:A Top Management Perspective

What do we want?

What can we do?

What do ourcustomers want?

What do our employees,intermediaries, and

other partners want?

From Losers to Leaders: Moving Up the Service Performance Ladder

• Service Leaders– Crème de la crème of their respective industries

– Names synonymous with outstanding service, customer delight

• Service Professionals– Clear positioning strategy

– Sustained reputation for meeting customer expectations

• Service Non-entities– Traditional operations mindset

– Rudimentary marketing, often emphasizing price discounts

• Service Losers– Only survive because of lack of viable alternatives in marketplace

Achieving Service Leadership by Focusing on Role of Each Functional Area

• Marketing: move from tactical to innovative and strategic

• Operations: move from reactive/cost oriented to focused, innovative, well coordinated with marketing and HR

• Human Resources: move from tight control of low-cost workers to quality of employees as strategic advantage

Leadership for Change Management Involves Eight Stages

• Create sense of urgency to develop impetus for change• Put together strong team to direct process• Create appropriate vision of where organization must go• Communicate new vision broadly• Empower employees to act on vision• Produce sufficient short term results to create credibility• Build momentum to tackle tougher problems• Anchor new behaviors in the organizational culture

Source: John Kotter

Leadership Qualities Needed in Service Organizations

• Vision, charisma, persistence, high expectations, expertise, empathy, persuasiveness, integrity

• Ability to visualize quality of service as foundation for competing

• Believe in people who work for the firm, make good communications a priority

• Possess a natural enthusiasm for the business, teach it to others, pass on nuances, secrets, crafts of operating

• Cultivate leadership qualities of others in organization

• Use values to navigate firms through difficult times

Transformational Leadership May Require Changing Corporate Culture

• Corporate Culture:– Shared perceptions regarding what is important– Shared values about what is right and wrong– Shared understanding about what works and what doesn’t– Shared beliefs about why these things are important– Shared styles of working and relating to others

• Climate for Service--Tangible working environment atop underlying culture. Influential factors include:– Shared perceptions concerning practices, procedures and types of

behaviors that get rewarded – Clarity about mission and values, level of commitment to common

purpose– Flexibility: freedom to innovate, sense of responsibility, standards