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SERVICE RECOVERY AND EMPOWERMENT

PRESENTED BY : ARSHPREET KAUR (15039) SURAJ VERMA (15040) RAJAT NARWAL (15041

ServiceRecovery Refers to the actions by an organization in response to a service failure. Deviations in Services Quality can be engineered with a very high precision in goods. Great strides have been achieved in this regard with automation and mechanization. A major difference between product marketing and service marketing is that we can't control the quality of our products as well as P&G control engineer on a production line can control quality of his product. When you buy a box of Tide, you can be reasonably sure that it will work to get your clothes clean. When you buy a Holiday Inn room, you are sure to some lesser percentage that it will work to give you a good night's sleep without any hassle, or people banging on the walls and all the bad things that can happen to you in a hotel. 3 This observation very profoundly highlights inconsistent nature of services. Things can go wrong to upset the service delivery. A 100 per cent consistency in service delivery is not possible. Causes within the firm or outside can create positions of departure.

Service Failures Service firms must reconcile with one reality: things can go wrong. Uncertainty shrouds the services. Due to a variety of reasons, service experience can vary in quality. When things go wrong, what should be the response of the firm? The response to the situations of failures can take two forms: ignore failure and do nothing or recognize failure and be prepared to recover from it. The process of getting back into shape or regaining the balance is called recovery. In the context of service businesses when service delivery is not right the first time, firms can choose to try second time. Though initial failure has happened yet the second try can be made to minimize the negative impact on the customer. For instance, Dominos promises pizza delivery within 30 minutes. But when promise is not kept and delivery is delayed due to unforeseen event, the pizzas are given free to compensate for the disappointment. Many good airlines have policy of making comfortable stay arrangements when flights get delayed.

Types of Service Encounters Service encounter is an event when customer interacts with the service provider. It is the moment when customer expectations meet with service delivery and quality perceptions are formed. Encounters can be brief involving one employee and few seconds to long running into hours and multiple employees. Customer forms perceptions about the service quality at these moments of truths. Hart, Heskett and Sasser6 distinguish between different types of encounters. A clear hierarchy of outcomes from service encounters can be established. An interaction of customer with the service system can yield customer experience ranging from the best outcome to the worst outcome with different shades in between: Best encounter: The best service encounter is the one where the service is performed as expected without any problem. The service is delivered in an anticipated fashion. It is this situation when customer expectations are met. For instance, a packet sent thorough FedEx is delivered before 10 AM the next morning as promised.

Customer Response to Failures How do customers feel when things go wrong? Data compiled by the Technical Assistance Research Program Institute is illuminating in this context. Managers need to take a good look at it because all is not well when somebody is not shouting out there. When complain box remains empty, and customers silently do business without getting back with complaints, it does not mean business is doing fine. The TARP7 research findings on complaining are startling. Beneath the apparent silence on surface, there may be lot of churn. i. In general, most of the customers do not complain when they get dissatisfied. A large majority of dissatisfied customers (between 70 and 75 per cent) of manufactured goods do not complain. Demographically, complaining customers belong to young-age groups, highincome categories and educated class.

ii.

Customer Feelings How should the service failures be handled? What should be the recovery SOP or standard operating procedure? What specific actions should be taken? The answers to these questions are important for devising response mechanism when failures

occur. First of all, it is necessary to understand how failures affect customers. How do they feel when their expectations are not met? Service failures may differ in their gravity so can customers in their ability to withstand failures. Irritation When delivery falls short of expectations in a minor way, it can cause annoyance. Annoyance is a minor feeling of irritation. Customers get irritated when: i. ii. iii. It takes a little longer to withdraw cash form a teller The cab does not show in time When orders are mixed up in a restaurant

How People Complain It is important to understand how people actually complain when failures take place. Do people really walk up the nearest employee and let loose their vents or do they start shouting to attract the attention of fellow consumers or do they speak to themselves silently? Complaints provide free market research on where the firm's service deserves attention and improvement. Tom Williams11 has studied customer complaining behaviour, and he proposes that the customer complains in various ways: complaint as grumble, informal complaint, written complaint and personal conversation. Looking at how people complain is essential for catching the complaint at the source itself. i. Grumble: If one keeps eyes and ears open with heightened sensitivity, it is not difficult to notice grumbling customers. At restaurants, patrons may grumble at warm but not hot coffee as one would like to have or dirty linen on the table. Grumble expresses customer's dissatisfaction over failed aspect of service but yet customers do not formally report these to the organization. However people do grumble and express their irritation to other people around them. The customer contact staff can play significant role in catching these grouses and let the management know the bugs in the system. The service delivery spaces are versatile grounds for discovering the irritants present in the system all it requires is the heightened sensitivity of the front. Effective Recovery First strategy for a service firm is to make sure that failures do not happen. The system planning and implementation must make sure that things should not go

wrong in the first place. But when they do, then efforts must be made to recover from the slide in the best possible manner. Ingredients of Recovery An effective recovery requires as many as five ingredients.12 The first two are a must for annoyed customers, whereas all of these ingredients are necessary for working with victimized customers. Apology Whenever things go wrong, the service personnel must acknowledge the error as soon as possible. Once the admission of the failure has been made that firm is wrong, an apology must be tendered. An apology, when made in person, is more appropriate from the customers perspective. Standardized signboards or banners must be avoided to convey repentance. It makes a lot of difference when one tenders a personal apology than when a cut-out is raised in front of grumbling people. Though signboards do fulfil the formal purpose yet when it comes to their impact they are impersonal and san emotions. Recovery Capability Failures can damage the customer base of a firm. Dissatisfaction can cause customers to look for alternate sources of supply. Customer defection can be a risky proposition. Defection can be minimized if the firm develops the capability to recover from occasional failures. Effective recovery can minimize damage to bottomline by winning customers when service slips. Hart, Heskett and Sasser13 propose how companies can develop recovery capability by paying attention to the following: Measure the cost of lost customer Often customer attraction takes big share of top management attention and resource. Little attention and resources are committed in keeping current customers happy. Managers underestimate the value of defecting customers. Perpetually attracting customers to fill the void created by defecting customers can be an unprofitable proposition. Maintaining existing customer economically may be more desirable. Measurement is essential before jumping onto any strategy. The cost and losses associated with defections and cost and profit potential associated with customer attraction must be calculated.

Failure Types Service encounter is the focal point in services. It is the moment when the service firm and customer interact to co-create service experience. All resources assembled in the service firm come together at the moment of service encounter to create the desired service experience. Individually anything that has potential to satisfy also would have the potential to offend or dissatisfy. In a typical service creation process, customer comes in contact with people atmospherics, processes, technology, equipments and other customers. All these capabilities and resources require pre-engineered performance to deliver desired satisfactions. Any deviation in their movement could cause failures, as the system would also deviate from the determined path.

Recovery Service When service firms stumbles doing the service the first time, it can try to restore customer confidence by doing it right the second time. Firms must have the capability to spring into action with a sense of urgency to correct the problems. Service recovery strategy must aim at first problem resolution and second improving the system so that problem reoccurrence is minimized. A four-step approach for designing recovery service strategy is proposed by Berry15: teaching importance of recovery service, identifying service problems, problem resolution and system improvement. Teaching importance In services, many things are attitudinal. Quality is a matter of attitude. Like quality, service recovery is also an attitude. The importance of customer to the business must be taught across the system especially to the employees who come in contact with customers. Employees must be educated on the virtues of customer retention. A frustrated customer on account of failure can spread negative word of mouth and block future business. In this context, the virtues of service recovery should be shared and transmitted.

Learning From Failures Failures are inevitable. These cannot be completely done away with. It is highly unlikely that a system could be fail proof. Even in goods marketing where the systems have become highly evolved and reached a great level of sophistication even the top companies like Toyota, Nokia and Sony had to announce large-scale

product recalls. The largest car maker Toyota Motor Corporation has recalled 2.3 million vehicles in the US which were fitted with faulty accelerator pedals. These fault in these paddles caused them to stick.16 Earlier Nokia had to recall phone chargers which posed shock hazard to its customers.17 The company promised to replace these chargers for free. Other well-regarded brands such as Apple, Cadbury, Lenovo and Mattel made product recalls when their products failed to perform in the expected way, exposing customers to different types of risks.

Service Guarantee Most of the manufactured goods come with some kind of warranty or guarantee. These words are often used interchangeably, but legally these may imply different meanings. A warranty or guarantee is an assurance provided to the customer of a good that it would perform in a certain manner or meet specification provided in the contract. These are often assumed in a contract of sale of goods and are also stated expressly. For instance, it is implied that a camera is not a camera if does not click the pictures, it is implied. However its defect-free operation may be guaranteed expressly for a period of one year. Car companies give warranty against any manufacturing defect on its engine for a certain number of kilometres or a given time, refrigera

Empowerment Service firms should wake up to the shortcomings associated with traditional centralized decision-making structures. The assembly line top-down approach did pay off in achieving efficiency gains for manufacturing firms. The efficiency gains and familiarity associated with top-down model subtly influenced the choice of service firms and they also modelled their organizations along the manufacturing lines. The discretion and decision making is concentrated at the top and people at the bottom represented hands with no discretion and influence over what they did. The old hierarchical structure symbolized concentration power at the top and people at the bottom carried execution. This division continued as a dominant framework in manufacturing....

Meaning Empowerment means committing to employees and the customers. Stated plainly, it is the removal of obstacles and barriers that prevent employees from doing their

jobs in order to create satisfied customers. This involves pushing down and distributing the decision making to the lowest levels of the organization. The frontline personnel are invested with authority and resources necessary to carry out their jobs. Employees are liberated from the highly standardized and mechanized processes and are given leeway in evolving their own roles as dictated by the situation.

How Companies Use Empowerment There are numerous examples of actions by empowered employees which have fabled stories. Empowered employees when they give high ratings to the statement indicating feel empowered lead to improved performance with a corresponding effect on customer rating high on feel served well. Kressaty25 cite examples of empowered action and their results. One such action by an empowered employee relates to an episode of a burn victim. In Hawaii, customer service department of a skin care firm received a call from a hospital. The case involved a 9-year-old who suffered from burns but local suppliers had run out of stock of a crme needed to reduce the discomfort of the patient. They could not find the needed crme anywhere. The customer service representative of the skin care firm promised to make available the crme the next day despite the fact it was a Saturday. The representative also knew that minimum required quantity for any shipment should be at least 50 cases and hospital in question was also not set up as a direct customer.

Benefits and Costs of Empowerment Bowen and Lawler31 provide a framework for answering some of the critical questions associated with empowerment. The benefits associated with empowerment must be weighed against the costs. Benefits A company can gain in more than one ways by empowering its employees. The important benefits associated with empowering people are: faster response to customer needs, faster recovery, employee happiness, warmth and enthusiastic performance, employee loyalty and commitment and suggestions for improvement from employees. i. Quicker response to customer needs during delivery: The rulebook model does not permit employees to bend rules in any condition. Strict regimentation does

not allow any deviation even when there is a potential to delight customer without involving any cost. For instance, a customer placing an order with the waiter asks for a change, the typical response in this case would be sorry sir, we can't do that, our rules do not allow. But any empowered employee would turn this situation into an opportunity to earn goodwill and enhance customer satisfaction. Empowerment is particularly beneficial when customer wants quicker response in a situation when paucity of time does not allow the matter to be taken to somebody up in the hierarchy.

How to Empower Production line approach is based on controls and standardization. Production line is a well-developed and widely practiced model in goods manufacturing. Empowerment is an evolving concept. In control model, the empowerment exists but at the top but in empowerment model it is pushed down to the bottom and shared widely across the organization. Both models are not dichotomous in nature. It is not to suggest that an organization can either adopt control or empowerment approach. Different levels of empowerment can be distinguished. Employees can be provided with varying degrees of autonomy and involved at different levels in decision making. Three levels can be distinguished: suggestion involvement, job involvement and high involvement.

Choice of Approach Each of the approach control or empowerment comes as a bundle of benefits and risks. The dominant advantages offered by control model include efficiencies and productivity. But it robs the system of its flexibility and humanization. Empowerment on the other hand equips the frontline with adaptability and lends human face-to-face interactions. But on the flip side, empowerment may be costly to implement and amount to handing over the entire organization to frontline staff. The choice between the two approaches is difficult. Bowen and Lawler 37 suggest five dimensions that must be considered while making a choice: business strategy, ties to customer, technology, business environment and the people in the organization.

Types of Organizations Employee discretion and the process type involved in an organization are important service management considerations. Depending upon the volume and variety involved in operations two types of organization types can be distinguished: the compliant and adaptive organization:41 i. Complaint organization: These are high-volume and low-variety services. The prime example of this kind of organization is McDonald's. The focus here tends to be on service delivery consistency (across time and across locations), development of highly structured processes, use of technology and high degree of automation and management style is directive with little discretion given to employees to temper with the processes. The employees are expected to comply with the systems and processes. The frontline employees in these systems are encouraged not to innovate and deviate from the norms. Sticking to the established designs is the foundation on which the scale is built. Discretion and deviations have effects on slowing down the processes; therefore are discouraged

Empowered Firm Clutterbuck and Kerngham42 urge that creating an empowered service firm requires an examination of five areas of management. These are goal setting, management attitude and roles, training and development, selection and recruitment and structure and systems.

Setting Goals Before empowerment, the management must assess the goals it wants to achieve. Specific goals must be set before hand. In the absence of measurable and clear goals, empowerment has a danger of becoming one of the many initiatives that are undertaken on a regular basis. Empowerment is not like a this month's program. It is an approach that defines the corporate culture and the way things happen. Before such transformation is initiated, the agenda must be clearly defined and communicated. For instance, the purpose is to increase customer retention by 2 per cent.

Change Management Attitudes and Roles The management attitudes and roles toward frontline employees must change if successful empowerment has to be done. Management must recognize the new roles and the problems of the frontline staff. Managers must shift from dictating mode to mentoring mode. Instead of guiding tactically as to how service is to be created, people on the job must be encouraged to take initiative and act on their own. Show them their potential, trust them, support them with tools and training that they need, and strive to remove the factors that inhibit them. They will reward you with financial results.43 Jan Carlzon, who turned around ailing SAS, made drastic changes in the corporate hierarchy so that frontline staff is able to respond to customer needs with speed and courtesy. To achieve this, the top management was charged with the task of creating an environment in which people could accept and execute their responsibilities. The middle management's role was to delegate responsibility and support front staff. On the whole, the top management must provide vision and leadership, the middle management must support and delegate to create empowered frontline.

Training and Development One necessary condition for perfect empowerment is training and development of the employees. This would enable and equip them to perform in new roles and new environment. Both new and old employees require different types of training. Experienced people face much more difficulty in accepting decision-making responsibility initially. This happens because of reverse delegation. These employees become used to passing every problem to the top. This often causes them to resist the idea of empowerment. New employees, on the other hand, usually have an opposite reaction. They assume decision making more readily and energetically. But their lack of experience often makes them approach their boss for advice on how to solve problem. They need training on how to handle problem at their own level.

SUMMING UP Two rules of quality in service are: quality lies in meeting and exceeding customer expectations; and service should be done right the first time. There is no second time in services. Even best of the service firms find it impossible to deliver service correctly all the times. Slips often take place. The tendency to run into problems is

not uncommon. Failures are a part and parcel of services. They cannot be completely done away with. Unlike goods, quality in services cannot be engineered with high precision and accuracy. The zero-defect philosophy is difficult to put in practice. As and when failures occur, some marketers tend to go dumb. Problems go unattended and uncared for because of the absence of recovery capability. Good firms sense opportunity even in failures. Failures provide opportunity to win back customer and reinforce faith in the system. Failures differ in their intensity. Some failures lead to minor irritation, while others can leave a customer feeling victimized. In such situations, firms must offer apology, urgently reinstate service, emphasize and atone failures.