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Tourism Quality Management

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 Magdalena Kachniewska

TOURISM QUALITY MANAGEMENT



 Magdalena Kachniewska

TOURISM QUALITY MANAGEMENT

Wydawnictwa Uczelniane
Wyszej Szkoy Handlu i Finansw Midzynarodowych
im. Fryderyka Skarbka

Warszawa 2006


Redakcja:

Korekta:

Copyright by WSHiFM, Warszawa 2006

ISBN

Wysza Szkoa Handlu i Finansw Midzynarodowych

ul. Nowogrodzka 56, 00-695 Warszawa
Tel 0-22- 622 0109, 621 4387, 629 2651
Fax 0-22- 629 4413
e-mail: biurorektora@poczta.wshifm.edu.pl
http//: www.wshifm.edu.pl

Opracowanie komputerowe, druk ioprawa:

Dom Wydawniczy ELIPSA
ul. Inflancka 15/198, 00-189 Warszawa
tel./fax 0-22 635 03 01, 0-22 635 17 85,
e-mail: elipsa@elipsa.pl, www.elipsa.pl


Contents

FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART ONE: RATIONALE FOR QUALITY MANAGEMENT IN

THE TOURISM INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. The Concept of Tourism Product . . . . . . . . . . . . . . . . . . . . . . . . . .
1.1. What is Tourism? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2. Specificity of the Tourism Product . . . . . . . . . . . . . . . . . . . . . . . . .
1.3. Challenges Facing Modern Tourism . . . . . . . . . . . . . . . . . . . . . . . .
2. Services as the Integral Part of a Tourism Product . . . . . . . . . . . .
2.1. Services versus Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2. Service Attributes and Obstacles to Attaining Quality
Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Definitions of Quality Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. The Significance of Quality in Modern Tourism Development . .
4.1. Competition in the Tourism Market . . . . . . . . . . . . . . . . . . . . . . .
4.2. How quality improves business . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.3. Social Aspects of Quality Management in Tourism . . . . . . . . . . .
4.4. The Power of Loyalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Tourism Product Quality a Complex Matter . . . . . . . . . . . . . . .

PART TWO: TOURISM ENTERPRISE A CUSTOMER

DRIVEN ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Customer Focus Whats New about It? . . . . . . . . . . . . . . . . . . .
7. Customer as Co-Producer of Value . . . . . . . . . . . . . . . . . . . . . . . .
7.1. Customer Defined Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.2. Customer Effects on Service Quality . . . . . . . . . . . . . . . . . . . . . . .
7.3. Complaint Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. The Employee as Internal Customer . . . . . . . . . . . . . . . . . . . . . . .
8.1. Internal Clients Need Internal Marketing . . . . . . . . . . . . . . . . . . .
8.2. Tourism Employees as Determinants of Quality Service . . . . . . .
8.3. Barriers to Quality Enhancement in Tourism Service
Encounters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Quality Culture in a Tourism Enterprise . . . . . . . . . . . . . . . . . . . .
9.1. Understanding What Corporate Culture is . . . . . . . . . . . . . . . . . .
9.2. Leadership for Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.3. Establishing a Quality Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.4. The Power of Empowerment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


PART THREE: QUALITY MANAGEMENT SYSTEMS . . . . . . . . .
10. Introduction to TQM Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1. Evolution of Quality Management . . . . . . . . . . . . . . . . . . . . . . . . .
10.2. The Total Quality Approach to Quality Management . . . . . . . . .
10.3. Basic Principles of TQM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.4. TQM Implementation Process benefits and pitfalls . . . . . . . . .
10.5. Is TQM a miracle to happen? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.6. TQM Concept in a Tourism Destination Area . . . . . . . . . . . . . . .
11. ISO Management System Standards . . . . . . . . . . . . . . . . . . . . . . .
11.1. International Organization for Standarization (ISO) . . . . . . . . .
11.2. Management System Standards . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.3. ISO 9000 as a Route to Implementing TQM . . . . . . . . . . . . . . . .
12. Registration to ISO 9001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.1. International Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.2. Rules and Motivation for Registration to ISO 9001 . . . . . . . . . . .
12.3. ISO 9001 in Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Standards as a Communication Tool . . . . . . . . . . . . . . . . . . . . . . .

PART FOUR: CONTINUOUS IMPROVEMENT . . . . . . . . . . . . . . .

14. Is It Possible to Measure Service Quality? . . . . . . . . . . . . . . . . . .
15. Cost of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.1. The Money in Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.2. Cost of Quality (COQ) Models. . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.3. Approaches to Quality Cost Measurement . . . . . . . . . . . . . . . . . .
15.4. Cost-tracing Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Tools for Cost Tracing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.1. ABC of Cost Tracing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.2. Vital Few and Trivial Many Principle . . . . . . . . . . . . . . . . . . . . .
16.3. Pareto Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. Tools for Quality Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.1. Quality Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.2. Self-audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.3. Self-assessment and Quality Awards . . . . . . . . . . . . . . . . . . . . . . .
18. Hard and Soft Tools for Quality . . . . . . . . . . . . . . . . . . . . . . .
18.1. Fishbone Diagram . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.2. Quality Function Deployment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.3. Critical Incident Technique . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19. Competitive Benchmarking as a Service Improvement Tool . . . .
20. Do Loyalty Programmes Serve Tourism Product Quality? . . . . .
Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
List of abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Figures

Figure I: International Tourist Arrivals, 19502004 . . . . . . . . .

Figure II: Economic Growth and International Tourist Arrivals
Figure III: Tourist Purchase-Consumption Process . . . . . . . . . . .
Figure IV: Impact of demand fluctuation while capacity
remains inflexible . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure V: A tourism sector model . . . . . . . . . . . . . . . . . . . . . . . .
Figure VI: The cycle of competitiveness . . . . . . . . . . . . . . . . . . . .
Figure VII: Interaction and customization . . . . . . . . . . . . . . . . . . .
Figure VIII: Where value is added . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure IX: Economic and Social Aspects of Quality . . . . . . . . . .
Figure X: Loyalty-based business system . . . . . . . . . . . . . . . . . .
Figure XI: The Customer Loyalty Ladder . . . . . . . . . . . . . . . . . .
Figure XII: The services marketing triangle . . . . . . . . . . . . . . . . .
Figure XIII: Quality dimensions in tourism . . . . . . . . . . . . . . . . . . .
Figure XIV: The Quality Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure XV: The servuction system model . . . . . . . . . . . . . . . . . . .
Figure XVI: Model for Quality Implementation . . . . . . . . . . . . . .
Figure XVII: Benefits of Empowered Employees . . . . . . . . . . . . . .
Figure XVIII: How Management Can Empower Employees . . . . . .
Figure XIX: The four levels in the evolution of quality manage-
ment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure XX: The Total Quality System Model . . . . . . . . . . . . . . . . .
Figure XXI: The quality development wheel . . . . . . . . . . . . . . . . .
Figure XXII: The concept of Total Quality Tourism Consortium . .
Figure XXIII: ISO 9000 and tourism: the vicious circle effect . . . . .
Figure XXIV: Quality Gap Analysis Model . . . . . . . . . . . . . . . . . . . .
Figure XXV: Changes in customer-dissatisfaction costs . . . . . . . . .
Figure XXVI: Reduction and shares of different COQ items . . . . .
Figure XXVII: Cost of Quality (from typical costs to optimum) . . . .
Figure XXVIII: Jurans COQ model . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure XXIX: Quality economics . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure XXX: Activity-Based Costing Model . . . . . . . . . . . . . . . . . . .
Figure XXXI: General principles of self-auditing . . . . . . . . . . . . . . .
Figure XXXII: The European Quality Award Framework (Business
Excellence Model) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure XXXIII: Baldrige Award criteria Framework . . . . . . . . . . . . . .
Figure XXXIV: Example Fishbone Diagram . . . . . . . . . . . . . . . . . . . .
Figure XXXV: House of Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure XXXVI: The benchmarking process model . . . . . . . . . . . . . . .


Tables

Table I: Specific examples of services, differentiated by various

parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table II: Quality characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table III: Intangibility across service types . . . . . . . . . . . . . . . . . . . . .
Table IV: Grouping of Similar Services . . . . . . . . . . . . . . . . . . . . . . . .
Table V: Definitions of quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table VI: Important factors when choosing a hotel for business . . .
Table VII: Levels of customer participation across different services
Table VIII: Definitions of TQM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table IX: NON-TQM organisation and TQM organization . . . . . . .
Table X: Internal and external profits of TQM implementation . . .
Table XI: ISO 9000 family and complementary standards . . . . . . . .
Table XII: Examples of International Standards . . . . . . . . . . . . . . . . .
Table XIII: Types of perceived risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table XIV: Quality in different areas of society . . . . . . . . . . . . . . . . . .
Table XV: SERVQUAL Dimensions . . . . . . . . . . . . . . . . . . . . . . . . . .
Table XVI: Loyalty programmes in tourism . . . . . . . . . . . . . . . . . . . . .


Foreword

Tourism today is a global business in which the competition and the

customers span international boundaries. Managers competing in the
fierce international marketplace are increasingly concerned with
astrategic view of quality. Such strategy provides goods and services
that completely satisfy both internal and external customers by meeting
their explicit and implicit demands. Through its strategic definition of
meeting the needs of customers, quality influences or defines every
generally accepted source of advantage (cost leadership, technology,
distribution channels etc.).
Quality can be achieved in each and every tourism company or
establishment irrespective of its grade or category, sophistication or
level of luxury. Even a very modest or low-priced accommodation,
catering or another tourism establishment is capable of providing
quality. On the contrary, an expensive establishment or service does not
automatically carry the quality result and perception.
Tourism Quality Management handbook contains some basic issues
connected with the problem of quality management both in the tourism
enterprise and tourism destination area (TDA). Quality in tourism is
measured by the quality of tourism experience. In other words, it is
nothing else but the quality of life during the persons temporary stay
outside his/her permanent residence. What is also true is that tourism,
especially leisure or holiday tourism, carries the expectation of ahigher
quality of life than experienced at home. It seems to be the most
important reason for quality management in tourism organizations and
TDA. The rationale for tourism quality management has been
presented in detail in the first part of the book. It covers four main
issues:
it defines the phenomena of tourism (Chapter 1),
it introduces the concept of services in a marketing concept and
enumerates obstacles in quality enhancing typical of service
companies (Chapter 2),
it defines the basic definitions of quality terms (Chapter 3),
it presents the interrelationship between quality and competitiveness
of tourism enterprise and tourism region (Chapter 4)
it identifies basic problems in tourism product management
(Chapter5).
The world's tourism industry has survived to see the rise of the
service society and the global economy. A number of factors have led to


the present situation in which constant environmental flux is accepted as
the norm. These include a shifting and expansion of the tourism market,
changes in the composition and values of the workforce, and rising
expectations on the part of the customer, all accompanied by intensified
competition. According to the modern relationship marketing approach
customers are to be understood as clients (guests) as well as internal
customers (employees). Customer loyalty has three second-order effects:
(1) revenue grows as a result of repeat purchases and referrals, (2) costs
decline as a result of lower acquisition expenses and from the efficiencies
of serving experienced customers, and (3) employee retention increases
because job pride and satisfaction increase, in turn creating a loop that
reinforces customer loyalty and further reducing costs as hiring and
training costs shrink and productivity rises. Thus the main stress of the
second part (Customer driven organization) is put on the problems of
customer-oriented organization (Chapter 6, 7 and 8). According to the
rules of modern marketing (including the internal marketing matters)
the part covers not only serving guests and visitors but also the relations
with/between the employees of a tourism enterprise (Chapter 8).
Interaction between people, being the basis of service encounter quality,
cannot occur in avacuum all the interactions are influenced by the
situation in which they take place. Thus a huge part of the text is
devoted to the subject of corporate culture, especially leadership
andempowerment, constituting the cornerstones of quality culture
(Chapter9).
One of the most important parts of the book (Quality Management
Systems) contains introduction to total quality philosophy (Chapter 10)
as the most powerful and well known quality school. Since in my
opinion there is no quality unless it is total, Iam fully convinced that
TQM constitutes the only way to quality enhancement in tourism. Also
the title of the book refers to the abbreviation of Total Quality
Management (TQM).)
One of the most controversial point in this part of the book is the
usability of ISO 9000 standards in tourism enterprise and their
helpfulness on the route to TQM (Chapter 11). Despite many negative
opinions, the revision of ISO 9000 family in 2000 made the standards be
very useful tool especially for young and small organizations, with no
advanced quality systems and no experience in this field. That point of
view has been presented in Chapter 12 covering the rules and motivation
for registration to ISO 9001. Chapter 13 covers the idea of using
standards (not only those proposed by ISO) as a communication tool.
Last but not least the fourth part of the book presents the way
towards continuous improvement in a tourism enterprise. First of all

10
Itried to collect some most popular ways of measuring quality of
services (Chapter 14). They usually present the customers point of
view. However hotels and other tourism companies need to know the
cost of providing a quality service and the impact on their bottom line so
they are looking for ways of measuring quality. A lot of managers still
treats quality cost as the main reason for neglecting any quality activities
in their organizations. Chapter 15 contains the review of quality cost
models and cost tracing methods. Its main aim is to put stress on the
problem of quality cost management which should start from the bad
quality cost cuts.
Chapters 17 and 18 contain the review of some other quality tools
which might also be used in tourism enterprises. They cover the tools for
quality assessment (audits and self-assessment) as well as so called
hard and soft tools for quality. Evaluation of quality system might
help to recognize the major non-compliances but can not be solely
treated as a quality improvement techniques. Quality tools include many
techniques usually linked up to manufacturing. Some of them are
treated as hard tools and quite rarely used in service companies,
however such techniques like Ishikawa diagram or Pareto analysis give
the unique possibility to improve management systems in any
organization and can be very useful in service (tourism) enterprise. The
review of so called soft management tools contains critical incidents
technique (CIT) and quality function deployment (QFD). Last but not
least the ideas of competitive benchmarking (Chapter 19) and loyalty
programmes (Chapter 20) as service improvement tools have been
revised.
Tourism Quality Management handbook gives the very basic
knowledge of quality definitions, models and enhancement tools. It is
addressed to students and those looking for the first steps on the quality
improvement route. The book can not be treated as the guide for quality
managers however it is a good starting point for those studying quality
issues for the first time. It might also be useful for students and/or
managers who have already had some practice in quality management
field within manufacturing but need to broaden their knowledge on
service (tourism) industry specificity.

11
12
PART ONE: RATIONALE FOR QUALITY
MANAGEMENT IN THE TOURISM
INDUSTRY

1. The Concept of Tourism Product

1.1. What is Tourism?

Historically the concept of tourism was first developed in the period
between the two world wars. Tourism was defined as a sum of relations
and phenomena resulting from the travel and stay of non-residents, in
so far as travel does not lead to permanent residence and is not
connected with any permanent or temporary earning activity (Hunziker
and Krapf in Burkart and Medlik, 1981). Since 1942 the concept of
tourism has been broadened by including various forms of business and
pleasure travel. Tourismcomprises more than travelling to visit friends
for aweekend or to go on holiday. The so-called business and congress
tourism, including travelling for improving professional qualifications,
is a demand of great importance for the tourism sector and is estimated
to amount to about 20% of arrivals (Leidner, 2004).
World Tourism Organization defines tourism as the activities of definition of
persons travelling to and staying in places outside their usual tourism
environment for not more than one complete year for leisure, business
and other purposes.
This multi-faced field touches many lives and many economic
activities. It is made up of many sectors or subindustries such as
transportation, accommodation, attractions, amenities, catering, enter
tainment,shops, activity facilities (leisure and recreation), and many
others. The provision of different product and services for visitors
(individuals, groups of people) depends on the linkages between various
sectors and their mutual interactions.
The concept of tourism can be applied to different forms of tourism.
Depending upon whether a person is travelling to, from or within
acertain country the following forms can be distinguished:
inbound tourism involving the non-residents received by adestina forms of tourism
tion country from the point of view of that destination;
outbound tourism involving residents travelling to another country
from the point of view of the country of origin;
domestic tourism involving residents of a given country travelling
within that country.

13
 Different forms of tourism can be distinguished, based upon:
the purpose of the visit (e.g. leisure and recreation including holidays
and visiting friends and relatives, business and professional including
conferences and meetings),
the duration of the stay (aweekend, a business trip as well as
traditional longer holidays),
the nature of the trip (domestic or cross-border destination),
the type of destination (rural, urban, coastal, mountain),
the distance travelled (long haul and short haul),
the nature of tourists themselves (e.g. youngsters, families, ..).
All types of travellers engaged in tourism are described as visitors.
Visitors can be distinguished as same-day visitors or tourists (overnight
visitors). According to international definitions (Eurostat):
visitors visitor is any person travelling to a place other than that of his/her
usual environment for less than 12 consecutive months and whose
main purpose of travel is other than the exercise of an activity
remunerated from within the place visited,
tourists and same day visitor is a visitor who does not spend the night in
same-day visitors acollective or private accommodation in the place visited,
tourist is a visitor who stay at least one night in collective or private
accommodation in the place/country visited,
Four groups of participants are involved and are influenced by
tourism: 1) tourists, 2) businesses providing goods and services that the
tourist market demands, 3) the government of the host community
and4) the host community itself. These groups cooperate to accomplish
a set of goals at the micro and macro levels within constantly changing
legal, political, economic, social and technological environments
(McIntosh, Goeldner, Ritchie, 1995).
tourism industry Within the last 50 years the tourism industry has become a sector of
since 1950s major economic importance. Even if the development of the number of
international arrivals is only a week indicator regarding the economic
importance of tourism, their astronomical increase since 1950 gives an
impression of the dynamism in the tourism sector: the number of
international arrivals shows an evolution from a mere 25 million
international arrivals in 1950 to an estimated 763 million in 2004,
corresponding to an average annual growth rate of 6.5 per cent.
Tourism is now one of the worlds major industries and is, for the
large part, responsible for much economic growth, balance of payments,
employment and regional balances in individual countries and across
regions. The substantial growth of the tourism activity clearly marks
tourism as one of the most remarkable economic and social phenomena
of the past century.

14
Figure I: International Tourist Arrivals, 19502004
800
Middle East
700
Africa
600 Asia and Pacific
500 Americas
(million)

Europe
400

300
200
100
0
1950 1960 1970 1980 1990 2000

Source: WTO, 2006.

Despite crisis-induced slumps the long term growth trend in tourism growth trend in
appears to be stable. Development was particularly strong in Asia and tourism
the Pacific (13 per cent on average a year) and in the Middle East (10%)
while the Americas (5%) and Europe (6%), grew at a slower pace and
slightly below the worlds average growth. New destinations are steadily
increasing their market share while more mature regions such as Europe
and the Americas tend to have less dynamic growth.

Figure II: Economic Growth and International Tourist Arrivals

12
Real GDP
(% change over previous year)

10 Tourist Arrivals
Average 19752000
8 Average 19752000

6
4
2
0
-2
1975 1980 1985 1990 1995 2000 2005

Source: WTO, 2006.

Tourism demand depends above all strongly on the economic tourism demand
conditions in major generating markets. When economies grow, levels characteristics
of disposable income will usually also rise. A relatively large part of
discretionary income will typically be spent on tourism, in particular in

15
 the case of emerging economies. A tightening of the economic situation
on the other hand, will often result in a decrease or trading down of
tourism spending. In general, the growth of international tourism
arrivals significantly outpaces growth of economic output as measured
in Gross Domestic Product (GDP). In years when world economic
growth exceeds 4 per cent, the growth of tourism volume tends to be
higher. When GDP growth falls below 2 per cent, tourism growth tends
to be even lower. In the period 19752000 tourism increased at an
average rate of 4.6 per cent a year.
Tourism has become an integral component of lifestyle and, thus,
aglobal industry, with producers and consumers spread throughout the
world. The future trends for tourism seem to suggest that travellers
willbe especially concerned with not just being there, but with
participating, learning and experiencing the place they visit. What is
especially important from the point of view of this book tourists
requirements are also tied to the level of their income. Todays
hospitality consumers are increasingly becoming more sophisticated in
the standards which they expect and more vocal about products and
services which do not meet their requirements in terms of choice and
quality.

1.2. Specificity of the Tourism Product

tourism product According to the theory of marketing product is everything, what can
definition become an object of exchange. A product can be also defined as an offer
given to a salesman, which is verified by the market. A tourism product
can be defined in two ways. It is everything that tourists buy or do in the
place of destination (Altkorn, 2004). Tourism is the sum of the
phenomena and relationships arising from the interaction among
tourists, business suppliers, host governments, host communities, origin
governments, universities, community colleges and non-governmental
organizations, in the process of attracting, transporting, hosting and
managing these tourists and other visitors (Reid, 2003).
heterogenity of Unlike other products offered by manufacturing or service compa
tourism nies, tourism products are heterogeneous they are complex and consist
of many complementary components provided by suppliers from various
public and private sectors (Figure III). The purchase and consumption
of the tourism product is spread over time and distance. Thus, the
tourism consumer buys expectations at the tourism generating area
(TGA) which should meet with the reality during the transit and

 A region where tourist demand originates.

16
consumption of the tourism product at the tourism destination area
(TDA).

Figure III: Tourist Purchase-Consumption Process

STAGE 5: FEEDBACK STAGE 4: CONSUMPTION of primary

(impact on purchase of travel-back-homecomponents;
primary vacation and PURCHASE and CONSUMPTION
travel components) of secondary travel-back-home components

TOURISM GENERATING AREA TRANSIT TOURISM DESTINATION AREA

SECTOR SECTOR SECTOR
public/private/voluntary public/private/voluntary public/private/voluntary
information centres, modes of transport, accommodation,
travel agents, road, catering,
transport companies, transit facilities, attractions,
transport tereminals, exchange office, entertaiment,
travel associations, other recreational facilities,
travel insurance companies, infrastructure,
passport/visa services, urban transport,
exchange office, banks, streets/roads,
other information centres,
hospitable behaviour,
other

STAGE 1: PURCHASE STAGE 2: CONSUMPTION STAGE 3: CONSUMPTION

of primary vacation and of primary travel-to-destination of primary vacation components;
Travel components components; PURCHASE of PURCHASE and
secondary travel-to-destination CONSUMPTION of secondary
components vacation components

Source: Augustyn (1998).

Each tourism organization provides only one or several components

of the total tourism product that is consumed during the course of the
complete tourism experience. Therefore, in order to enhance customer
satisfaction, tourism companies have to establish effective relationships
with their stakeholders, and especially with their suppliers, defined as
those companies operating within the external environment that are
responsible for the provision of other components of the total tourism
product. However, it is hardly possible for any tourism company to
achieve this goal due to the existence of the tourism quality control gap
(Augustyn, 1998). How to explain this gap?
Tourists tend to base their judgments on the quality of and tourism value
satisfaction with a vacation experience on all components of a complex chain
tourism system. These components are captured by the tourism value
chain underlying both the production and consumption of holiday

 A coherent tourism receiving region that has some common tourism features
and the potential for tourism development, e.g. a city, a county or a region beyond
the administrative boundaries of a city, county, etc.

17
 orvacation experiences (Bieger, 1997). Since all relevant services
contributing to the holiday or vacation experience take place in the
context of a tourist destination, tourism researchers accept tourist
destinations as the relevant unit for competition and/or benchmarking
analyses. This also applies to the tourism value chain which constitutes
the total customer (tourist) value associated with the holiday experience
at a destination. It is irrelevant whether tourism services comprising the
tourism value chain are produced and distributed by a multitude of
different tourism enterprises, or whether they are produced and sold by
a single firm such as a tour operator. The consumer (tourist) judges the
total holiday experience, even though tourists do experience a multitude
of individual service encounters and can also evaluate their inherent
qualities (Weiermair and Fuchs, 1998).
tourism quality Thus the tourism quality control gap (Augustyn, 1998), relates to the
control gap discrepancy between the need for quality control at every stage of the
total tourism product delivery and the feasibility of the individual
tourism company of exerting actual control over this process. The
existence of this gap accounts for an inability of individual tourism
companies to offer the total quality tourism product that the customer
expects at the beginning of the tourist purchase consumption process.
The tourism quality control gap is also responsible for the increasing
number of tourists dissatisfied with their total tourism experience.
Tourists consume other elements of the total tourism product during
their overall tourism experience, mainly at the destination area an
individual tour operating company is not in a position to control the
quality of all the elements of the total tourism product offered by the
providers operating at the host area. Moreover, the human aspect of the
product is of utmost importance for total tourist satisfaction, which can
be confronted only at the time of tourism consumption.
tourism product Tourism, typically a service offering, cannot be stored for future
characteristics consumption, this constitutes one of the unique features of services,
referred to as perishability (see chapter 2). In addition to the inability
to store tourism services, managers are also faced with seasonality,
which e.g. results in: a fluctuation in demand at a ski resort between
winter and summer; a fluctuation in occupancy in a city centre hotel
during weekdays and weekends, a fluctuation in demand at a restaurant
during breakfast, lunch and dinner hours to the rest of the day, the
fluctuation of demand for travel facilities during certain times of the
day (Kandampully, 2000). While the consumption of tangible goods
may be delayed for future consumption and/or inspection of quality,
services are generally produced and consumed almost simultaneously.
These differences render the delivery system and quality control systems

18
utilized in the product industry, inappropriate in tourism services.
Tourism managers are thus required to consider alternative strategies to
facilitate the efficient management of both demand and capacity
(supply) of services as, unlike the goods manufacturing industry, service
organizations are unable to increase the supply in accordance with the
increase in demand (Figure IV).
When the demand for tourism service is higher than the firms demand
capacity, the firm effectively loses its chance to serve those customers. fluctuations vs
Similarly, when the demand is less than capacity, the firm loses revenue fixed capacity
owing to unused resources. Given that capacity is a fixed component,
the only viable option for the service manager is to seek strategies that
assist them to influence demand, strategies which can induce customers
to voluntarily alter their demand. Additionally, excess capacity or low
demand will not only impair the firms profit, but will also affect the
quality of service experienced by tourists. A near empty cruiseliner not
only loses money, but will also fail to provide its passengers with an
important service element of travel experience, namely, the social
ambience that is created in the presence of fellow passengers
(Kandampully, 2000).

Figure IV: Impact of demand fluctuation while capacity remains inflexible

Excess demand
(lost business)
Maximum capacity

Capacity
Decrease in quality

Optimum capacity
Wasted resources
(lost opportunity)
Time
Source: Kandampully (2000).

On the other hand, if the firm were to adopt a strategy to utilize

excess demand by continually operating at above optimum or near
fullcapacity, it would expose the organization to long-term risks of
deterioration in the quality of service.
The challenges faced by service managers due to fixed capacity,
maybe deemed equally applicable to a service firms quality. Based
oncustomer expectation a firms quality of service is required to be

19
 consistent within a specific time frame and target market to gain
customer confidence, maintain image and subsequent effect on customer
loyalty. Hence, it is imperative that tourism managers design strategies
which will assist them to manage both demand and quality simulta
neously. For example, a special price menu for families with small
children may entice the family to use the restaurant facility before the
peak period. Thus enabling the firm to extend the restaurants capacity
to the slack period, serve different customer groups while maintaining
or enhancing the quality of experience of each group. It can be argued
that from a tourists perspective, tourism packages constitute the
offering of a variety of service products commensurate with their needs
(Kandampully, 2000).

1.3. Challenges Facing Modern Tourism

vertical and The tourism sector can be viewed as comprising a variety of producers,
horizontal distributors and facilitators. Whereas in the past the boundaries between
integration the different players in the market were clear, vertical and horizontal
integration in the tourism sector has resulted in a blurring of these
boundaries.
dual structure The field of tourism has developed a dual economic structure over
of the tourism the years. In the light of recent studies on the phenomena of con
market centration and restructuring, two categories of companies seem to
coexist:
the traditional small and medium sized enterprises (SMEs), which
seek a second breath, in order to become international and try
toadapt their services to the new requirements of domestic and
international demand, by the introduction of innovations (constitu
tion of purchase networks and regionalization of supply);
the corporate companies which specialize in large-scale tourism,
according to strategies of cost rationalization. They entered into
heavy restructuring operations, directing them towards increased
integration of subsectors.
Whereas in the target countries or destinations SMEs continue to
offer such tourism services as accommodation, catering and leisure time
activities, an international travel and tourism industry has gradually
emerged in the source countries as part of the globalization process.
SMEs in tourism, notable micro and small enterprises play a key role in
terms of number of enterprises, number of employees and profit, and on
average they are continuing to increase.
tourism market Tourism is today one of the most internationalized sectors of the
globalization world economy. The world tourism market has been substantially

20
Figure V: A tourism sector model

Producers Distributors Facilitators Consumers

Travel organisers and intermediaries

Transport
Vertical integration

Transport Transport
Attractions

Transport Transport
Accommo-
dation

Other, e.g.
catering

Horizontal integration and consolidation

Source: PriewaterhouseCoopers, 2001.

extended, adding considerably to the potential for further growth and at

the same time bringing about greater competition between tourism
countries. Globalization affects the supply and demand side in tourism
in many ways (Smeral, 1998). The most important supply factors are:
Worldwide acting suppliers, as well as the impact of computerized
information and reservation systems. Global-acting airlines, hotel
chains and tour operators already have branches throughout the
world and cover major parts of international tourism demand
withtheir global distribution systems (GDS). Strategic alliances,
cooperations and/or mergers are additional driving forces of the
globalization process (Sheldon, 1993).
Decreasing costs of air travel and the possibilities of having access to
destinations with relatively low price and income levels, as well as
relatively low social standards (Krugman and Venables, 1995).
The development of new destinations, supported by hardware
investments of multinational enterprises and infrastructure invest
ments.
Important demand factors for globalization are:
Increasing income and wealth, emerging new motives and changing
lifestyles.
Rising level of education tourists are more experienced and
knowledgeable (languages, use of information technology, booking,
use of transportation etc.)

21
 the meaning of Tourism is a beneficiary of the irreversible process of globalization
globalization and indeed is an accelerating factor for this process. According to dr
Minho Cho (2005) globalization has become an umbrella word for
anumber of political, sociological, environmental and economic trends
which present challenges on a worldwide scale. In a purely economic
sense, the term globalization stands for the increasing interdependence
of markets and production in different countries through trade of
goodsand services, cross-border flows of capital, international strategic
alliances, cooperation, mergers and exchanges of technology. Globali
zation also means an increase in the international fragmentation of
production, as well as the political trend towards a more liberal world
economic order. The trend to a division of labour on a worldwide basis
has been particularly favourable to tourism, resulting in increased
productivity and prosperity in a great many countries. The process of
globalization is also perceived as having a standardizing impact in
thoseproducts, services and institutions which originally offered only
domestically are being supplied on a worldwide scale.
consequences of The consequences of globalization have very strongly impacted on
globalization in the typical SMEs. The international travel and tourism industry is
tourism composed mainly of large companies that organize tourism to various
destinations on an industrial basis. They offer standardized products,
and develop global strategies that enable them to make the best use of
the local potential worldwide. Although the number of large companies
is relatively small in the tourism industry, they account for more than a
half of total turnover in the sector and for a significant proportion of
employment. The SMEs in traditional tourism areas are not yet ready to
cooperate with global players in world tourism industry on a wide scale
large companies and to form internationally competitive destinations. Large companies,
versus SMEs which benefit from standardisation and economies of scale, are in
aposition to offer their clients more attractive services at very
competitive prices. They are able to develop new tourism markets and
offer new products, what helps them to increase the customer value
and to reduce their production costs. The consequences for SMEs are
dramatic losses in market share and growing financial pressures as
opportunities for attracting new customers by taking advantage of the
globalization trends and/or the shift to post-modern consumption
structures are not realized (Alcouffe and Coulomb, 1993). There is
however a unique chance for SMEs thanks to a changing patterns of
tourism demand. Many visitors do not want standardised products they
prefer to tailor their holiday experience to their own specific needs and
tastes, insisting on personalised services. Thanks to a multi optional
supply of products and services which SMEs are able to offer,

22
destinations are in a position to adapt relatively quickly to the ever-
changing requirements of the individual tourism.
Even though there are only a few larger enterprises, it is to be
noticed that their economic importance in terms of turnover is high and
varies widely between the respective subsectors. The sector of tour
operators and travel agencies in Europe, for example, in the mid-1990s
consisted of about 44000 enterprises. At the time this market was the process of
already concentrated to a relatively high degree as five largest EU travel concentration in
organizers of 1997 represented a market share of 35%. In the second tourism
half of the 1990s rapid structural change took place resulting in an even
higher market concentration of 70% of the turnover yielded by the five
largest enterprises in 2002. The speed of this concentration process has
slowed down, but competition pressure will continue, especially if it
becomes true that the annual growth rate of the turnover of tour
operators will be halved in the coming years.
The hotel subsector recorded a concentration process as well, but it
was much slower than in the travel organisers sector and did not lead to
a similar degree of market concentration. The size of an average
European hotel increased slightly from 45.3 to 48 rooms per hotel in the
period from 1995 to 2001, but large hotel chains and brands only
represent between 10 and 20 % of the total room capacity in Europe. It
is an evidence that in an accommodation sector structural change is
taking place much more smoothly and has not yet increased the market
concentration to an extent similar to that for the travel organisers
market.

Figure VI: The cycle of competitiveness

increased
competition marketing
alliances

new
technologies

price
reduction
customer
expectation

Source: PricewaterhouseCoopers research, 2001.

23
innovations and Another challenge for tourism enterprises is the rising role of
information information technology in tourism. Generally tourism industry is based
technology on many innovations. In civil aviation charter flights were invented as
away of dealing with seasonal peaks in demand. Hotel chains that
sprouted from family firms, including the Hilton and Marriott empires,
grew out of a desire to satisfy the needs of business travellers, initially
those travelling from the USA. The rent-a car sector, which is today
agiant industry, allows visitors to have the same mobility abroad as they
do at home. Credit cards have made international money transfers much
easier while at the same time reducing the risks involved in foreign
innovations and exchange operations (CFE/TOU (2005)4). New technologies have an
competition important place in the cycle of competitiveness (Figure VI).
Technological innovations are having a significant effect on the
governance/management of the value chains and are encouraging the
development of new tourism business models in GVCs (global value
chain), notably for distribution chain. The major players have been the
main beneficiaries of technological innovation whereas the smaller
actors, due to lack of capital, IT literacy, techno phobia and above all
the lack of clear strategic plans are not always taking real advantage
oftechnological innovation. It is worth to mention that usually only
large enterprises carry out market research on their own and define
positioning strategies, with respect to targeted customers, and develop
the use of innovative tools in order to strengthen their competitiveness.
It should be recognized that their economic importance for the long-
term development and the competitiveness of the sector is much higher
than their relatively small number suggests.
Besides the technological challenges induces by the spread of new
information and communication technologies (ITCs), the evolvement
ofnature-based sustainable tourism seems to be one of the most
important changes affecting the competition process among tourism
enterprises.
There are also some demand structures affecting the activity of
tourism enterprises in a global tourism market. A steadily growing
number of tourists, does not mean that there are not considerable
changes in the types of tourism besides pure leisure activities such as
swimming, skiing or sunbathing other types have gained importance, for
example cultural and nature-based tourism. the enterprises have to react
to such changes and to adapt their products. The demographic changes
 Despite explosive growth in terms of turnover (from 1998 to 2001 turnover
from online travel doubled its share in the travel market), so far its share remains
rather small (3,6% in 2002). However, the growth forecast by 2006 would result in
an increase of turnover of about 120% (Leidner 2004).

24
reinforce these trends as the growing share of people over 50 as well as
disabled persons increases the demand for these more specific tourist
products. Health, spa and keep fit tourism are likely to be among
thesegments to benefit particularly from the increasing economic
importance of elderly tourists.
Todays secularly increased travel exposure and experience of quality demands
international tourists can be cited as the reason for such globally convergence
universal or converging behaviour. The increase in travel exposure and
experience leads to converging quality demands, particularly with
respect to technical (as opposed to functional) quality dimensions.
Referring to the travel experience of international tourists, we may well global travel
speak of a global travel culture which is shared among a large class of culture
frequent, experienced and quality conscientious vacationers. Lets take
the example of transportation services both to and from the destination.
Their embedded service qualities will be perceived, evaluated and
judged by tourists in terms of both globally shared values and standards.
This is particularly true for such dimensions as convenience of travel,
punctuality of travel schedules and customer orientation of service
personnel. On the other hand, culturally influenced perception and
evaluation criteria will be applied to other dimensions such as waiting
times and queuing, added service components and the choice of
transportation mode (Becker and Murmann, 1999). Tourists are critical
and demand high service quality with respect to the quality dimensions
of reliability, responsiveness and assurance (Mok and Armstrong, 1998),
suggesting that delivering services accurately and dependably is equally
important within and to all cultural settings.

2. Services as the Integral Part of a Tourism Product

2.1. Services versus Goods

The word service has a great richness and diversity of meaning. This
leads to considerable ambiguity when the concept is used in the
management literature, where, in its most basic sense, it can mean an
industry, an output or offering, or a process. Within the service process,
service may further indicate core service delivery, interpersonal
interaction, performance in a wider sense of drama or skill, or the
customers experience of service.
Different service industries are so variable in nature that authors are
advised to lay down parameters for each specific situation, and to give
actual examples wherever possible. Table Iprovides some parameters of

25
 this kind and shows how they can be used to characterize specific
situations.
three views on The issue of the differences between goods and services can be seen
services and goods from three viewpoints. The first view is widely held, and typified by
Kotler who said that marketing of goods and services should conform to
the same fundamental rules (Kotler 1980). The second is that there is
aneed for a different approach to marketing services because of the
differences which can be recognized in goods and services themselves
(Lovelock, 1984, Grnroos, 1984).
services-goods A third view is apparent in what actually happens in service
continuum businesses. There are few pure goods or pure services. Products are
actually combinations of service and goods elements, with one dominat
ing and presenting the prime characteristics. E. Gummesson clarifies the
position as follows: Customers do not buy goods or services in the
traditional sense. They buy an offering and the value [may] consist of
many components, some of them being activities (service) and some
being things (goods). As a consequence, the traditional division between
goods and services is long outdated. (Gummesson, 1994). Although
processes may appear different when the end product is a service rather
than goods, they are in fact identical, in that both involve the use of
facilities to act on inputs to satisfy the needs of the customer.
service process The idea that services are activities (performances) rather than things
(objects) leads to a notion of services as processes. This notion
introduces a new aspect of service processes, because performance
goes beyond simple execution, connoting drama, face-to-face contact, or
eye-catching skill. Service operations depend on the customer to provide
the information that is somehow the raw material to be transformed
into the service output. Thus service as a process not only is the
delivery of a core service, but also has a style or manner of its own,
imbued with artistic, dramatic or craftsmanlike possibilities (Johns,
1999).
unique attributes The major differences between service and manufacturing sectors
of services have an impact on the approach and substance of quality management.
Certain inherent characteristics of the service sector increase the
complexity of quality control and improvement efforts.
Service quality is an abstract and elusive construct because of some
features unique to services:
intangibility,
perishability,
simultaneity,
heterogeneity

26
 Table I: Specific examples of services, differentiated by various parameters

Service
Tangibility/ (Provider) Service staff (Customer) Level of
Interpersonal environment is
Service industry visibility of execution or are core experience or customer
attentiveness a key
output performance providers transaction control/choice
component?
airline low execution high no transaction low no
courtroom lawyer low performance low yes transaction low no
healthcare service low execution high yes (?) transaction low no
supermarket high performance low no transaction high yes
high street bank low execution low yes (?) transaction high no
hairdresser high execution high yes transaction high no
hotel high execution high no experience (?) low yes
restaurant high performance high no experience high yes
travel agent low execution high yes transaction high no
tourist attraction low performance low no experience low yes
electricity company low execution low no transaction low no
car repair high execution low yes transaction low no
school low performance high yes experience low yes (?)

Source: Johns (1999).

27
 intangibility Intangibility of service
Intangibility raises issues for both the consumer and the provider of
services. Customers cannot assess the intangible aspect of service prior
to purchase and consumption and hence they often must use the
reputation of a service firm and its representatives to judge quality. That
is why customers judge quality by comparing their perceptions of what
they receive with their expectations of what they should receive. The
lack of tangible attributes means that it is difficult for the producer to
describe the service and for the consumer to ascertain its likely virtues.
The consumer cannot see, feel, hear, smell, or touch the product before
it is purchased. Therefore, the consumer often looks for signs of quality:
for example: word of mouth; reputation; accessibility; communication;
physical tangibles; etc. This places greater responsibility on service orga
nizations to deliver what they promise, right, the first time (Haywood-
Farmer, 1988). Moreover, in service organizations frontline staff and
physical facilities fulfil the dual functions of production and marketing.
They are viewed by the potential customer as signs of quality.
quality Services cannot be evaluated in advance of use because, unlike
characteristics goods, they do not have many of search properties. The consumer
must rely on experience of the service itself (experience properties),
or if because of lack of specialist knowledge they are not capable of
making objective judgment during, or even after, the delivery process,
only credence properties can be used (Table II).

Table II: Quality characteristics

Examples
Quality Definition
Consumer services Business services
Search Can be evaluated shoes raw materials
prior to purchase jeans component parts
refrigerators office supplies
lawn mowers tools

Experience Can be evaluated only food janitorial services

after purchase catering service lawn services
entertainment delivery services
cosmetic surgery repair services

Credence Difficult to evaluate CPA services consulting

even after the service funeral services financial advice
education advertising
veterinarian insurance

Source: Kurtz and Clow (1998).

28
 Intangibility also requires that service producers take account of
consumer psychology, and make plans to cope with the difficulties of
demonstrating their offerings, while designing a new or revised service
package. They also have to acknowledge the probability of imitation of
successful services, since patents cannot be applied to the intangible
aspects of a service (Sasser et al., 1978).

Perishability perishability
Services cannot be stored in one time period for consumption
atalater date. This means that, unlike manufactured goods, it is
notpossible to have a final quality check. The service provider needs
togetthe service right first time, every time. In manufacturing, finished
good stocks are used to decouple production from variable demand,
andcomponent and raw material stocks are used to simplify planning
and control, but it is impossible to hold stocks of the explicit service
element of the service package, and this raises some particular issues
forservice management. Clearly the facilitating goods element of the
service package can be stocked in readiness for use, but a medical
consultation, haircut, or train journey cannot be produced in advance
ofrequirement. This forces services to deal with demand and
capacitymore directly, than is usually the case in manufacturing
situations, by:
chasing demand by increasing and decreasing resources;
influencing demand, for example by adjusting price or controlling
access; or
retaining excess capacity to be able to cope with fluctuations in
demand.
Perishability also requires that service production and service delivery
often must exist simultaneously.

Simultaneity (inseparability of production and consumption) inseparability

The high visibility of the service process means that it is not possible (simultaneity)
to hide mistakes or quality shortfalls. Moreover, the involvement of the
consumer in the delivery process introduces an additional process factor,
the consumer, over which the management has little or no direct control.
Moreover, the behaviour of one group of customers does influence
other customers perception of service.
Simultaneity occurs because the consumer usually has to be present
before a service takes place. In consequence services tend to form in
small and dispersed units, and it is difficult to take advantage of
economies of scale. There is evidence that the emergence of computer
and communications technologies is changing this in some service

29
 sectors (e.g. computer reservations in tourism), but personal contact
continues to be necessary for the majority.
A significant consequence of customer participation in the delivery
of services is that perceptions of quality are influenced by observation of
the environment, and the systems used. Service facilities, procedures
and systems should be designed with the customer in mind, as well as
the product and the workforce. The employee providing a service
must first diagnose individual customer expectations, and then customize
the service on the basis of the diagnosis. The employee must also assess
the quality of his or her performance, as it takes place, against their
assessment of the customers expectations, while remaining ready to
detect and respond to any adverse customer reactions which may occur.
(Morris and Johnston, 1987). This also means that the functions of
marketing and production (operations) cannot be separated in services.

heterogeneity Heterogeneity of services

Heterogeneity of services occurs in consequence of explicit and
implicit service elements relying on individual preferences and
perceptions. Differences exist in the outputs of firms producing the
same service, and within the same firm, and even the same employee
ondifferent occasions. Although unnecessary variation may occur
whichneeds to be controlled, the variety attributed to estimating, and
then matching, the consumers requirement is essential to customer
satisfaction. This inherent variability makes it difficult to set precise
quantifiable standards for all of the elements of service.
A number of factors can affect the extent of the heterogeneity of
service provisions. First, delivery of service often involves some form of
contact between the consumer and service provider. The behaviour of
the service provider influences the consumers perception of quality. It
is difficult to assure consistency and uniformity of behaviour. Moreover,
it is not easy to standardize and control this facet of service delivery. In
effect what the firm intends to deliver may be entirely different from
what the consumer receives. Second, service operations depend on
consumers to articulate their needs or provide information. The
accuracy of the information and the ability of the service provider to
interpret this information correctly has a significant influence on the
consumers perception of service quality. Third, the priority and
expectations of the consumer may vary each time he or she use the
service. Moreover, priority and expectations may change during the
delivery of the service. The variability of service from one period to
another and from consumer to consumer makes quality assurance
andcontrol difficult. Service providers have to rely heavily on the

30
competence and ability of their staff to understand the requirements of
customers and react in an appropriate manner.

2.2. Service Attributes and Obstacles to Attaining Quality

Enhancement
There are several service attributes which have particular significance service attributes
for management and control of service operations (adapted from affecting quality
Schmenner, 1986):
a. Labour intensity the ratio of labour costs incurred, to the value of
plant and equipment used. Some researchers make a distinction
between people- and equipment-based services.
b. Interaction defined as the extent to which the consumer actively
intervenes in the service process to change the content of the service.
Here, intervention is interpreted as also including customer
participation to provide information, from which needs can be
assessed, and also customer feedback, from which satisfaction can be
inferred (Figure VII).

Figure VII: Interaction and customization

Interaction and customisation

Low High

Low service factory service shop

Labour intensity
High mass service professional service

Source: Schmenner (1986).

c. The direct recipient of service can be either people or things. Some

researchers call this attribute the nature of the service act, as
service result can be either tangible or intangible (Table III).
d. Contact defined as the proportion of the total time required to
provide the service for which the consumer is present in the system.
This approach provided some insights into the nature of service
operations. It classifies services along a continuum from high to low
contact. Contact was defined in terms of the time that the consumer
is present in the service providing system.
e. Customization defined in two main parts: choice defined as
meeting customers needs by supplying one or more selections from

31
 a fixed range of options (low customization means that choice is
limited to a single option) and adaptation defined as the interaction
process in which the customers requirement is decided upon,
designed, and delivered to match the individuals needs.

Table III: Intangibility across service types

What is the Who or what is the direct recipient of the service?
nature of the
service act? People Possessions
Services directed Services directed
at peoples bodies at physical possessions
(people processing) (possessions processing)

passenger transportation freight transportation

health care repair and maintenance
Tangible lodging warehousing/storage
actions beauty salons janitorial services
physical therapy retail distribution
fitness centres laundry and dry cleaning
restaurants/bars refuelling
haircutting landscaping/lawn care
funeral services disposal/recycling
Services directed Services directed
at peoples minds at intangible assets
(mental stimulus processing) (information processing)

advertising/PR accounting
arts and entertainment banking
broadcasting/cable data processing
Intangible
actions management consulting data transmission
education insurance
information services legal services
music concerts programming
psychotherapy research
religion securities investment
voice telephone software consulting

Source: Lovelock (1984).

f. The place where value is added enables grouping all the services
into four groups (Maister, 1983): service factory, mass service, job
shop and professional service (Figure VIII below).

32
Figure VIII: Where value is added
Where value is added
Back room Front office
Programmed service factory mass service
Non-programmed job shop professional service

Source: Maister (1983).

As a result Dotchin and Oakland proposed the below classification of

services (Table IV):

Table IV: Grouping of Similar Services

Personal services
Driving school Sports coaching
Beautician Dental practice
Hairdresser Optician
Service shop
Clinic Cafeteria
Leisure centre Service station
Professional services
Accountant Architect
Finance consultancy Solicitors
Veterinary
Mass services
Hotel Restaurant
College Bus service
Coach service Rail service
Take-away Nursery
Courier firm
Service factory
Cleaning firm Postal service
Repair firm Equipment hire
Bank
Source: Dotchin and Oakland (1994b).

We can also enumerate some obstacles to attaining service quality obstacles to

improvements. The main of them is lack of visibility. Service quality attaining service
problems are not always visible to the provider. At any given time 25 per quality
cent of customers are sufficiently dissatisfied with a service to stop
repurchasing, yet only 4 per cent complain to the organization. This
places greater responsibility on the service provider to be proactive in
the identification of quality problems.
The second problem are difficulties in assigning specific accountability. lack of
The consumers overall perception of service quality is influenced by accountability

33
 experience at different stages of service delivery. However, it is hard to
attribute quality problems to a particular stage of service delivery.
time Next obstacle is time required to improve service quality. Service
quality problems often require major effort over a long period of time to
resolve. This is because service quality is more dependent on people
than systems and procedures. Attitudes and beliefs take longer to
change than procedures. It is difficult for managers to keep their
attention focused on the problem and remove the root causes of the
quality shortcomings.
delivery Last but not least delivery uncertainties. Control of service delivery
and quality is complicated by the individual and unpredictable nature of
people. The people element encompasses both customers and staff of
the service organization.
To sum up we shall notice that the attainment of service quality
requires:
service quality Market and customer focus. Service quality problems are more
requirements likely to arise in organizations that are not focused on identifying and
acting on the customers needs and expectations. A quality organization
should put itself in the customers shoes and build its policies from the
customers vantage point (Foster and Whittle, 1989).
Empowerment of frontline staff. Service quality can be enhanced by
giving frontline staff the latitude to make important decisions regarding
the customers needs. It is recognized that devolvement of those
decisions which affect customer care to the frontline staff pays dividends
(see more in chapter 9.4).
Well-trained and motivated staff. Frontline staff who are not
adequately trained for their job will find it difficult to perform their tasks
effectively. This will be noted by the client and is likely to cause adverse
quality perceptions. It is important to ensure that frontline staff are
effectively supported and motivated.
A clear service quality vision. In the absence of a clear vision and
definition employees are likely to have their own interpretation of
service quality. Lack of common vision will inevitably increase the
variability experienced by the customer within each stage of the service
delivery. Inconsistency and variability of treatment is likely to have an
adverse impact on the perception of quality.

3. Definitions of Quality Terms

To take a closer look at the quality management, an explanation of some
facts, terminology and regulations concerning quality seems to be

34
necessary. What needs to be revealed first of all, is what quality and
quality management actually mean, what the dimensions of quality are,
and what the differences between services quality management and
product quality management are.
Quality means different things to different people there exists no definition of
uniformly accepted definition of service quality. There are various well- quality
known definitions of quality: conformance to requirement (Crosby,
1979), fitness for use (Juran and Gryna, 1988), the degree of
conformance to a standard, user satisfaction (Wayne, 1983). It is
interesting to note that satisfying the customers needs and expectations
is the main factor in all these definitions. However it happens that
asupply of a service or product may be of the highest standard, but
thecustomer may have unreasonable expectations, which cannot be
metby any means at all.
Official definitions of quality terminology were first standardized in
1978 by the American National Standards Institute (ANSI) and the
American Society for Quality Control (ASQC). Quality was defined as
the totality of features and characteristics of a product or service that bears
on its ability to satisfy given needs (ANSI/ASQC 1978). Since 1987
according to the standard ISO 9000 quality is defined as a degree to
which a set of inherent (existing) characteristics fulfil the requirements
(ISO 9000:2000).
The above mentioned definition indicates the specific set of
adjectives the word quality should be described with (e.g. low, good,
perfect etc). It also implies that we must be able to identify the features
and characteristics of products and services that relate to quality, and
form the basis for measurement and control. Fulfilling the requirements
reflects the value of the product as well as the service to the customer,
including not only economic value but also other factors such as safety,
reliability or maintainability. Below see some more definitions of
quality.
Each definition has its own group of supporters, and various schools
of quality have grown up around particular versions. This has led to
fragmentation and confusion in the field of quality. As the given example
shows, the quality can and needs to be viewed from several different
perspectives. The main problem is how to create the basis of quality in

 Quality responds rather to the question how than what, although without
what quality cannot be delivered. In some Slav languages this is well reflected
although those who speak these languages may not aware of this connotation. For
example, in Polish jako (quality) follows on jak (how), similarly in Russian
(quality) follows on (how). (Handszuh, 2004).

35
 companies, how it depends on work environment and how it looks like
in particular sectors (industry, services etc.).

Table V: Definitions of quality

1. Quality is the degree of excellence at an acceptable price and the control of

variability at an acceptable cost. (Broh, 1982).
2. Quality consists of the capacity to satisfy wants.(Edwards, 1968).
3. Quality [means] conformance to requirements. (Crosby, 1980).
4. Quality is (1) product performance which results in customer satisfaction (2)
freedom from product deficiencies, which avoids customer dissatisfaction.
(Juran, 1985, p. 5).
5. Quality...is the extent to which the customer or users believe the product or
service surpasses their needs and expectations (Gitlow et al., 1989).
6. Good quality...means a predictable degree of uniformity and dependability
at a low cost with a quality suited to the market (Deming, 1986, p. 176).
7. (Quality is) the total composite product and service characteristics of
marketing, engineering, manufacture and maintenance through which the
product in use will meet the expectations of the customer (Feigenbaum,
1986).
8. Quality is anything which can be improved (Imai, 1986).
9. Quality is the loss a product causes to society after being shipped (Taguchi,
1986, p.1).
10. Definition of quality (...) a thing is said to have the positive attribute of
conformance to specified standards (Shewhart, 1931).

Most of the service quality definitions fall within the customer-led

category. Many researchers define quality as consistently meeting or
exceeding customers expectations (Moore, 1987, Creedon, 1988). To
describe the various viewpoints of quality that are commonly used
Garvin (1984), discusses five different approaches to defining quality.
product-based A product-based definition describes quality as a precise and
approach measurable variable and indicates that differences in quality reflect
differences in quantity of some product attribute. Here quality is
defined as the units of goodness packed into a product or service. Thus,
a quality service will contain more units of goodness than a lower
quality service. This definition relies on the quantification of the
services units of goodness or tangible attributes. In practice, however, it
is not easy to clearly identify services attributes, let alone quantify them.
In addition, goodness is not absolute but relative to a particular
circumstance. For example, customers may judge a theme parks
production to be of higher quality than a Covent Garden production.
This situation arises despite the fact that a Covent Garden production
will invariably possess more units of goodness. The question is why
some people will rate the quality of a theme parks production higher?

36
The higher service quality perceived in the theme park is attained by
closely meeting customers demands and expectations. Interestingly,
many people perceive that quality is somehow synonymous with
attributes.
A process-based definition (supply-led definition) describes qualityas process-based
an outcome of engineering and manufacturing practice, or conformance approach
to specification. Specifications are targets and tolerances determined
by designers of products and services, and targets are the ideal values
for which production should strive; tolerances are specified though,
because designers realize that it is not possible to meet the targets all
the time. For example, in services, on-time arrival for an airplane
might be specified as within 15 minutes of a scheduled arrival time; the
target is the scheduled time, and the tolerance is specified to be 15
minutes. These definitions lay emphasis on the importance of the
management and control of supply-side quality. The focus is internal
rather than external. Such a definition might be useful in organizations
producing either standard products or services, or where the output
istangible. Organizations offering a standard service involving low
orshort customer contact, such as refuse collection, postal service,
home deliveries, public transport, financial services and fast food
chains, may find this definition useful. This is partly because of the
important role of process in determining the quality of the outcome.
A user-based definition is based on the presumption that quality is user-based
determined by what a customer wants and what he is willing to pay for. approach
Here the focus is external. Quality is defined as satisfying customers
requirements or fitness for purpose. This approach relies on the
ability of the organization to determine customers requirements
andthen meet these requirements. The customer-led definition is
probablymost appropriate for organizations offering high-contact,
skillknowledge-based, or labour-intensive services such as, health
care, law, accountancy, hairdressing, education, consultancy, leisure, and
hotels. Individuals have different needs and hence different quality
standards, therefore quality depends on how well the product or service
performs its intended function.
Finally, the value-based definition states out that quality is defined value-based
interms of costs and prices a quality product is the one that provides approach
performance at an acceptable price or conformance at an acceptable
level. Quality, here, is defined either as the cost to the producer
 This definition, as it is driven by customer satisfaction, has become the

principal definition of quality for managers, and by the end of the 1980s on its
basis a related, though fundamentally different, definition emerged: Quality is
meeting or exceeding customer expectations.

37
 andprice to the customer or as meeting the customers requirements
in terms of quality, price, and availability. The focus again is external.
The transcendent definition of quality is characterized by an image
ofexcellence as perceived by the competency of employees, the
availability of additional services, or the availability of advanced
technology (on-line booking, business centre, professional conference
rooms). These judgments are made by guests and third-party
organizations (tour-operators, business partners). Auditing of employees
efficiency and resource consumption views quality along the product-
based dimension. The guests perception of services and equipment is
focused on the user-based definition, which influences business hotels
and forces them to provide services to meet these expectations. It is not
constant and may change according to changes in fashion, education
level, experience, technology development etc.
As the demand for flawless service increases, the hotel staff
andcomplementary services must turn their attention to quality to
amanufacturing-based definition (standardization, licensing require
ments etc.). Lastly, because of the rise in business hotel prices, the
value-based definition has received a great attention in recent years, and
all parties (guests, local people and the hotel sector) are involved in this
controversy.
service encounter Although the rendering of services may involve some physical
goods,it is commonly people who render services to the customer.
Indeed, the critical time for service quality to be clearly understood is
during the one-to-one interactions that occur between the consumer and
the provider, the so-called service encounter. Customers commonly
interact intimately with the service production process. This inside
knowledge presents them with the opportunity to assess services
critically, in particular the quality of service.
To illustrate how these different views can apply to a single service,
lets consider the service provided in a business hotel (for examples see
table VI).
service quality According to Lewis and Booms (1982), service quality is a measure
definition of how well the service delivered matches customers expectations.
Parasuraman define the quality perceived in a service to be a function
of the gap between consumers expectations of the service and their
perception of the actual service delivered by the organization
(Parasuraman et al., 1985).
We do already know what service and service quality is. How to
understand then quality management?

38
Table VI: Important factors when choosing a hotel for business
Today FACTORS
1 Quiet room
2 Spotlessly clean/hygienic
3 Control over temperature
4 High safety standards
5 Safe location
6 Highly efficient messaging services
7 Availability of no smoking rooms
8 Location near the city centre
9 Inclusive hotel package
10 Rapid turnaround cleaning
In the future
1 High-tech business/communication facilities
2 Safe location
3 Availability of no smoking rooms
4 High safety standards
5 Highly efficient messaging services
6 Spotlessly clean/hygienic
7 Quiet room
8 Ability to earn airline mileage
9 Control over temperature
10 Environmentally friendly room
Source: Inter-Continental Hotels and Resorts 1998

Quality management is usually defined as a set of coordinated the concept

activities to direct and control an organization with regard to quality of quality
(ISO 9000:2000). It could be of reactive or proactive character. Reactive management
approach means in fact complaints management and reflects the desire reactive approach
to avoid problems with customers instead of recognising and dealing
with their requirements. Quality is not considered as a major source of
service differentiation or competitive advantage. The principal emphasis
of reactive approach is minimization of customer annoyance, rather
than realization of customer satisfaction. The efforts of quality planning
and control are focused on hygiene factors. These are the factors that
are taken for granted by the customer: for example, time of departure of
a plane or clean tables and utensils at a restaurant. To ensure customer

39
 satisfaction, it is not sufficient solely to comply with the hygiene factors.
Meeting these requirements does not ensure customer satisfaction;
however it helps to avid their dissatisfaction.
proactive On the opposite the proactive quality management is always of
approach strategic character. Quality is used to differentiate the organizations
service offering and lies at the heart of the organizations strategy to
gain competitive advantage. Here, usually, quality is one of the primary
drivers of the business. Corporate image is built around the quality of
the offering; for example, British Airways emphasis on customer care.
The accent, here, is on gaining customer satisfaction. The quality
phenomenon is the source for strengthening and differentiating the
offering and the organization from what is offered by the competitors.
strategic quality Generally strategic quality management (SQM) is a systematic
management approach for setting and meeting quality goals throughout the company
(Juran and Gryna, 1988). It can be defined as a comprehensive and
strategic framework linking profitability, business objectives, and compe
titiveness to quality improvement efforts with the aim of harnessing the
human, material and information resources organization-wide in
continuously improving products or services that will allow the delivery
of customer satisfaction (Tummala and Tang, 1996). The launch of
aSQM programme requires a clear understanding of the service quality
vantage point (definition and vision), customers expectations, perceived
quality, measures of quality, and generic determinants of quality.

4. T
 he Significance of Quality in Modern Tourism
Development

4.1. Competition in the Tourism Market

We are all aware that quality has become one of the most, if not the
most, important factors in international competition for business success
and that continuous improvement in quality makes good business sense.
This is especially true of the broad tourism sector, where an ever-
increasing array of new tourism destinations has forced destination
marketers and operations managers to invest in the delivery of higher
levels of service quality as a competitive strategy aimed at differentiating
their product offering (WTO, 2004). Growing competition, lack of
willingness to provide a service, growing loss of individuality by
standardization of products, adverse price performance ration etc. are
good reasons for systematic quality management in tourism are widely
documented: growing competition.

40
 Given the increasingly competitive nature of this sector, industry quality as
professionals must now concern themselves with not only increasing adeterminant of
market share, but also satisfying and maintaining the existing customer competitiveness
base. Guests require products where they are sure of getting top-quality,
value-for-money services. Consequently, a large proportion of organi
zational effort is now being directed at both getting and keeping
customers (Christopher et al., 1991). However not all the enterprises
and tourism areas are aware of the importance of quality factor in
todays tourism market. It seems that service inefficiency and poor
standards are rife within the international tourism sector. What is
unfortunate for the majority of tourism related organizations today,
however, is that the modern day customer has tasted quality and now
demands it as his or her right. No longer is the old axiom of location
good enough to ensure instant profit and business success tourisms
future it seems rests with quality, quality, quality. (ONeil, 1996)
Companies with perceived high quality goods and services
typically had higher market share, higher return on investment and asset
turnover than companies with perceived low quality. In the long term,
the most important factor affecting business performance is the quality
of goods and services offered by the organization, relative to its
competitors.
Service quality is considered a critical determinant of competi
tiveness. Attention to service quality can help an organization to
differentiate itself from other organizations and through it gain a lasting
competitive advantage. In some manufacturing industries service quality
is considered a more important order winner than product quality.
Superior service quality is a key to improved profitability, and not the
cost of doing business.
Service quality affects the repurchase intentions of both existing and
potential customers. The poor service will reduce the potential customer
base. Tourism operators have to serve an increasingly discerning public,
who are now more eager than ever to complain and transfer their
allegiances to perceived providers of quality services. This, coupled with
the increasingly hostile nature of the present business environment, has
forced many within the tourism sector to invest in the delivery of higher
levels of service quality as a means of achieving competitive differen
tiation (ONeil et al., 2000).
The growing competition in tourism industry, transfer of new price-versus
technologies, specific and constantly changing customers preferences quality
are the main factors of the growing interest in quality management competition
programs. Price competition seems to be no longer a successful
diversification tool. In long term it could even bring losses and destruct

41
 the company. The concept of quality not only sounds intuitively
desirable but also has been empirically linked to advantages such as
customer satisfaction and repeat purchases, brand loyalty and larger
market shares. Unless customers perceive that they are receiving
aquality service that meets their expectations, they will consider taking
quality as their custom elsewhere. Quality now manifests itself as a hygiene
ahygiene factor factor for service organizations. Hygiene is essential for health, but
cannot of itself guarantee health (Cowling and Newman, 1995).
Improving the quality of services has many aspects:
main aspects strategic the company must focus on quality itself as the tool for
of quality competitiveness. The products relative advantage (i.e. perceived as
management being superior) is recognized to be one of the key factors that
differentiates between success and failure. This is in terms of being
able to offer unique or superior benefits to the customer, providing
some benefits not previously available, satisfying clearly identified
customer needs, solving customer problems with existing products or
being first to the market so that there is no direct competition;
marketing products should comply with customers requirements.
Companies try to achieve their own constant clients because the
tough competition may lead to push them out of the market. Strong
position, trust and quality are the determinants of gaining stable
market share. A lack of understanding of customers and also
competitors has been linked to product failure. Companies should
concentrate on the up-front activities (i.e. market research) for
success;
economic the company must bring profits which is possible by
offering the products strictly meeting customers requirements.
(Notice however that the process is effective only when the
competitiveness of the company is higher than others, when clients
respect and appreciate high quality and they are eager to pay more
for getting it.);
technological quick development of technologies implements better
adjustment to the market;
social clients dement high quality which in long term implements
work of employees; social environment insist on environmentally
clean products and services processes being in accordance with
sustainable development approach, moreover, since the company
uses local resources local people want to participate in its profits
either directly or through the companys participation in any local
development activities;
law products must comply to appropriate standards and regulations
specific to different sectors of economy,

42
 nformation spreading so fast that companies are to take care of
their image through the constant improvement of their products
quality.
The quality efforts of many firms were motivated by real success
stories of companies like Xerox, Motorola, Ford and General Motors
where the adoption of quality practices had significant positive influence
on the global performance of these companies. In this context quality is
considered the only way to maintain a competitive advantage and
astrategic weapon. Many studies investigate the relationships between
quality efforts and financial performance measures such as profit
margin, return on equity and net profit after tax.

4.2. How quality improves business

The literature indicates also that the setting and maintenance of quality
standards is an increasingly important activity for hospitality firms and
tourism areas. More and more often, guests and customers are opting
for those products and services that allow them to be certain of receiving
high quality and value for money. Below find the main arguments for
quality improvement in a business organization:
Improving quality generates higher profits. arguments
Better services are directly reflected in the business success, compen for quality
sation costs are reduced and guest loyalty is promoted. If buyers can improvement
detect higher quality of products and services encounters, they will
reward such sellers with greater volume. If reimbursement is above
marginal cost, this higher volume turns directly into higher profits.
Higher quality, in a sense, generates its own reward.
Quality management decreases costs.
The introduction of a quality management system does not come
free. But it is much more expensive to go on making the same mistakes,
having the same loses, manage all the same complaints, dealing with
some misunderstanding between employees suffering from the badly
organized workplace etc. Despite cutting costs by preventing mistakes
and lower costs of control, high quality means lower costs thanks to
more effective work, less stuff needed because the work is efficient,
consequently cheaper services. Still it is worth understanding: quality
efforts and investments are by their nature long-term investments.
High quality service brings competitive advantages.
The quality programme promotes the creativity of services, making
them more difficult to copy, thus improving the market chances. In
tourism guests look for an aid to orientation in the wide variety of
tourist offers and quality assurance is one of points of orientation for

43
the customers enabling them to make right decisions. High quality is the
way to better and stronger trade mark which generates higher profit.
Quality management leads to increased employees morale and job
satisfaction and therefore less fluctuation.
If employees are involved in the preparation and implementation of
the quality programme and they see the system to be more profitable for
themselves as well, they are more motivated, satisfied and loyal. This
can be gained through better communication between management and
employees. Proper quality management reduces employee turnover and
therefore also reduces costs.
As a result quality management encourages hospitality.
All employees pull together in the same direction guest satisfaction
and the guests notice that. Thats why it is crucial to employ staff truly
devoted to their job and responsibilities.
Quality management enhances company image.
Customers prefer companies with some kind of a Quality Label as it
generally means better customer service and ensures reliability. Quality
in fact is the only way to create the market brand.
Proper customer service is more effective than expensive advertising.
Improving customer service is essential for tourism industry. It is
sometimes easier and cheaper to rely on customers recommendations
by satisfying their needs rather than putting a lot of money in marketing,
advertising and sales promotions. It has been proven, that 9 out of 10
guests spend their holidays on the recommendation of friends and
relatives.
Quality management improves financing possibilities.
The creditors tend to require financial schemes which are tied with
quality management plans. This also proves, that introducing quality
management systems leads to increasing companies value, creditability
and reliability. Receiving financial help such as loans or leasing becomes
easier and sometimes less expensive.
Quality management improves dealing with critical incidents.
Each guest has his specific expectations, needs and opinions. No
matter how tactful staff may be, the odd mistake or misunderstanding is
unavoidable. Such occurrences are described as critical incidents (see
chapter 18.3); these are defects of varying degrees in a service chain
which result in failure to satisfy guest expectations and hence trigger
dissatisfaction. Guests tend to remember critical incidents and do not
hesitate to talk about them.
One of the most important developments in the tourism industry is
the growing attention for service quality from the customers perspective.
This is the consequence of the growing customer dominance in the

44
service process. Nowadays, customers are much better informed about
travelling and are increasingly experienced travellers, which makes them
less dependent on the proficiency of the service provider, e.g. the travel
agent. As the customers dominance increases, he becomes more and
more demanding.
One of the ways to improve quality is by introducing radical changes,
meaning that the existing system is replaced with another, better one. It
means going beyond the usual service and developing new designs,
procedures, methods, service concepts and service delivery systems. In
other words innovation. For example, instead of presenting more
choice in package tours, a travel agent shall use a mass customisation
strategy (creating modular components that can be configured into
avariety of individualised packages). Customers do not want more
choice of package tours; they just want exactly what they need.
Quality management in tourism is becoming popular especially quality
within the accommodation industry. Breiter et al. (1995) remark that management in
total quality management in hotels is becoming commonplace and tourism some
recount the case in the USA of Bergstrom Hotels who have been examples
practicing quality principles since 1989. Bergstroms quality
commitment has evolved into continuous improvement based on
systematic decision-making, teamwork and human resource support
systems. Also in the USA, Ritz-Carlton Hotel company have produced
Gold Standards which include a credo, motto and 20 Ritz-Carlton
Basics in the quality management programme. Their initiative has led
them to be the first hotel group to win the Malcolm Baldrige National
Quality Award (Partlow, 1993). In the UK, the Sutcliffe Group of
contract caterers seeks to define quality as a means of sustaining growth,
improving client retention and focusing employees on providing
aquality service (Page, 1994). Callan (1992) reports the case of the
Avant Hotel in Oldham, which was the first UK hotel recipient of the
British Standard BS 5750.
Quality looked for by the customers in tourism means much more business versus
then just service quality of tourism enterprise it is also the problem of social aspects in
the destination area where quality management is much more TDA
complicated due to the fact that it does not depend just on the resources
of a single company. As the tourism product is not only produced by
several private suppliers (accommodation, catering, travel organisers,
attractions, leisure activities) but also public or semi-public institutions
(roads, municipal services, theatres, museums) a close private-public
partnership is needed to raise the competitiveness not only of individual
 BS 5750 is a set of documented operational quality standards that is accepted
by the British Standards Institution (BSI) and regularly monitored by them.

45
 enterprise but of the destination as the conglomerate of all the product
components needed to make a holiday. It means that quality of the
tourism area (tourism destination) cannot be developed only in the very
strict business aspect.
The tourism industry should constantly review its market standing in
relation to the global competition. There is an ever increasing number
of tourist destinations competing for the customers business, and
customers do not tend to be loyal to one particular service or product,
but look for innovative ideas which present real value. If visitors
expectations of quality and value for money are not met they will
simply not return and their verdict...will influence their friends choice
of holiday destination. (ONeill et al., 1994). In fact, one of the most
important characteristics of the tourism sector is that all the decisions
taken by consumers or enterprises are determined not only by economic
factors such as price relations and the development of wages and
interest rates, but also by changes in the perception of a destination
(Leidner 2004).

4.3. Social Aspects of Quality Management in Tourism

Service is becoming the differentiator and the source of achieving
acompetitive edge. At its heart must be the realization that service is
about people and the manner in which they are managed. Total quality
management is one such approach because it is a strategy, which is
concerned with changing the fundamental beliefs, values and culture of
a company, harnessing the enthusiasm and participation of everyone (...)
towards an overall ideal of right first time (Atkinson and Naden, 1989).
Fundamental to this strategy is the human element of the service
production and delivery process.
quality of life Longenecker and Scazzero (2000) present the following description:
Restaurants make customers wait too long for food that may be cold or
poorly prepared. Airliners have long waiting and departure lines for check-
in and baggage pick-up. Hotel rooms are not always properly cleaned or
maintained according to specified company standards. Long cycle times
often exist for hospital emergency room patients in need of urgent care.
Government agencies are frequently accused of being unresponsive and
sluggish in providing critical human services. And, as the popularity of
online shopping grows, orders can contain the wrong items or the items are
damaged in transit.
Life seems to be horrible in such circumstances. On the contrary:
Better quality of life means better people commitment, better quality of
work, better results (products, services) and as a result better quality

46
of life! Quality of services is a visible sign of the everyday life quality in
agiven society.
One of the measures of quality is job satisfaction. Obviously, when quality influence
the employees are highly motivated and content due to the job they do, on the job
they work more efficiently and pay more attention to the tasks they are satisfaction
responsible for. That is why quality strategies are connected not only
with external clients that means producing goods or services of quality
but also internal ones, that is creating high quality products by involved
and qualified stuff (Hjalager, 2001). Work environment conditions affect
work satisfaction and thus customer perceived service quality. Services
are usually more or less abstract or immaterial, which makes them
difficult to get inspected and assessed before buying. Services do not
have a lifetime, they only exist under a short period and they cannot be
stored. They are produced, delivered, consumed and marketed
simultaneously. That is why services quality must be built in as the
service is developed. Quality is not engineered-in at the manufacturing
plant, then delivered intact to the customer. In labour-intensive services
quality occurs during service delivery (Parasuraman et al., 1985). There
is no customer satisfaction without satisfied employees. That is a very
basic social aspect of quality management.

Figure IX: Economic and Social Aspects of Quality

START

Employees Quality Preventing Efficiency Lower costs

enhancement anhancement
commitment mistakes

Higher Lower price Higher Higher sales Employment

profits Higher quality market share volume increase

Success oriented
activities

SUCCESS

Source: Kachniewska (2005).

47
 4.4. The Power of Loyalty
Marketing acting alone cannot create sustainable loyalty. Customers
remain loyal, not because of promotions and marketing programmes,
but because of the value they receive. Value is driven by a full array of
features, such as product quality, service, sales support and availability.
The sales force controls customer acquisition, manufacturing is respon
sible for quality, the service department manages direct interactions
with the customer, and so forth.
Marketings job is to ensure that the efforts of each department are
coordinated into effective delivery of a unique value proposition, which
will provide superior value and, thus, earn customer loyalty. Marketing
conceptualizes the value proposition and envisions how to present it in
terms that the customer will understand, but bringing it to life requires
the efforts of all the other company functions.
stoping the F. Reichheld (1996) points out: You cant grow when customers are
leakages defecting out the back door faster than the salesforce can pull new ones
in the front door. You cant increase productivity (or real wages) when
employees are jumping ship while they are still being trained. You cant
manage a long-term strategy when half the owners on January 1 will be
replaced by new owners by November 30. Believe it or not, the average
company today loses half its customers in five years, half its employees
in four years, and half its investors in less than one year. Isnt it easier to
fill a bucket when it isnt leaking?
loyalty based Main principles of loyalty-based management are:
management Qualifying and acquiring guests who value and appreciate your
principles product builds repeat visits, sales and referrals. Concentrating
investment on selected customers improves loyalty and further
stimulates sustainable growth.
Sustainable growth enables the enterprise to attract and retain better
employees. The opportunity to design and deliver superior value to
achosen group of customers increases staff satisfaction.
As staff learn about the enterprises operations and align financial
with other constants, they can reduce cost and improve quality.
Loyal donors behave like partners. They can fund investments, lower
the cost of capital and ensure cash flow. Leaders who want to build
loyalty and generate the loyalty effect must exercise extreme
discipline to protect their partners interests. They know that the key
to winning is not to make sure their competitors lose, but to make
sure their partners win.
the service-profit The service-profit chain (Figure X) establishes relationships between
chain profitability, customer loyalty, employee satisfaction and productivity.

48
The better economics mean the company can pay workers better, which
sets off a whole chain of events. Increased pay boosts employee morale
and commitment; as employees stay longer, their productivity rises and
training costs fall; employees overall job satisfaction, combined with
their knowledge and experience, leads to better service to customers;
customers are more inclined to stay loyal to the company. The best
customers and employees become part of the loyalty-based system
(Heskett et al., 1994).

Figure X: Loyalty-based business system

MARKET
SHARE

VALUE CUSTOMER COST PROFIT

RETENTION

EMPLOYEE
RETENTION

Source: Reichheld (1994).

Improving customer acquisition, hiring and motivating and retaining customer

employees, building better investment and governance structures are all retention
part of an integrated approach resulting in and from loyalty-based
management. There is a high correlation between customer retention
and company profitability according to the US strategy consulting firm
Bain & Company. Its research showed that a 5% increase in customer
retention leads to a considerable rise in net present value profits, from
50 to 125%. Nobody is pretending that a 5% increase in customer
retention will be easy to obtain, but even a 1% increase could yield
considerable improvement in profitability (Payne, 1994). This calculation
is based on the expected cash flow over a customers lifetime the
longer they stay the more profits they bring the company. What is more,
customers typically generate increasingly more profit each year they stay
with the company. Retaining customers allows the company to develop

49
 a deeper relationship with them and encourages repeated and
increasingly frequent buying activity.
That is why rather than concentrating on applying cost-cutting
measures to increase the benefits of quality management, management
needs to instil a value-added approach among the staff to challenge
them to review their own operations and evaluate the benefits they
value-added individually provide to internal and external customers. This concept
versus cost-cutting isbased on focusing attention on adding value rather cutting costs.
approach Thevalue-added approach to quality cost and quality improvement
maintains the focus on the customer and ensures that the end user
rather than the provider defines quality. A formalized system for
monitoring customers opinions and complaints should therefore be in
place.
Retention should be treated as the central gauge that integrates all
the dimensions of an organization, and its measurement can predict how
well an enterprise creates value for its clients, donors, and even
community. If a company can
communicate
this value in financial terms
to its employees they will give more thought to ensuring that customer
satisfaction is achieved.
retention There are a few
reasons
why retaining customers are so profitable
profitability (Reichheld, 1994):
sales and marketing and set-up costs are amortized over a longer
customer lifetime;
customer expenditure increases over time;
repeat customers often cost less to service;
satisfied customers provide referrals;
satisfied customers may be prepared to pay a price premium.
Customer retention also helps to predict the profitability of the
company and is therefore an excellent management tool for considering
the success of quality and customer service programs. There is also
another important reason to remember: a customer lost through
dissatisfaction with the service provider will be one gained by
acompetitor. Keeping customers is therefore a key strategic issue for
service companies to address. Key features of such an approach include
(Howe et al., 1992):
The voice of the customer is incorporated into product/service
decisions.
how to keep Customer commitment is earned in a social contract.
customers There is open exchange of ideas for mutual gain.
Employees develop a greater identification with the corporation
(justas the supplying corporation must become more customer-
oriented).

50
 Customers are involved in product design, production and service.
There is close partnership between suppliers and customers.
Customers are viewed as individual people and so are value
providers.
There is continuous interaction and dialogue between suppliers and
customers.
There is a focus on discovering, creating, arousing and responding to
customer needs.
Relationships are viewed as enterprise assets.
Integral elements of the relationship marketing approach that help relationship
to reach customers are promise concept and trust. The responsibilities marketing
of marketing include giving promises and thus persuading customers in
order to attract new customers and initially build relationships, as well
as fulfilling these promises (Calonius, 1988). Otherwise, if promises are
not kept, the evolving relationship cannot be maintained and enhanced,
and the seller fails at achieving retention of the consumer base and
longterm profitability. On the other hand, trust was defined as awilling
ness to rely on an exchange partner in whom one has confidence
(Moorman et al., 1993).
Establishing a relationship can be divided into two parts: attracting
new customers and building relationships with them in order to achieve
all economic goals resulting from that relationship. Along the way, there
are two marketing strategies (Fornell, 1992), both of them deals with
different element of these two elements of the relationship-building.
Offensive marketing strategy would focus on obtaining new custo offensive
mers and increase customers purchase frequency. It strives to attract marketing strategy
dissatisfied competitors customers and makes potential customers to
take the next step. This strategy can be divided into three main areas.
First, team activities; second, string tactics includes such things as
newsletters, civic activities and general publicity, and third, clutching at
straws tactics is mainly publicity, including brochures, large-scale
seminars and most direct mails (Fergusson, 1996).
Defensive marketing strategy is concerned with minimizing customer defensive
turnover and geared to managing the dissatisfaction among a firms own marketing strategy
customers. It consists of two components: customer satisfaction and
 WOM is the key type of communication used in relationship marketing.
Positive WOM, informal communications directed at other consumers about the
ownership, usage or characteristics of particular services and their sellers is
avaluable vehicle for promoting products and services. Given its non-commercial
nature, WOM is viewed with less skepticism than firm-initiated promotion, it is
very influential in any purchase decisions, especially in services, where a single
recommendation is often sufficient to convince a person to try a particular service
provider.

51
 switching barriers (barriers that make it costly for a customer to switch
to another supplier). Different types of costs (search costs, learning
costs, emotional costs); cognitive effort and risk factors (financial,
psychological, social) constitute switching barriers from the customers
switching point of view (Storbacka, 1994). The basic argument for this strategy is
barriers that the cost of obtaining a new customer exceeds the cost of retaining
an existing customer. Organizations frequently acknowledge that exist
ing customers are easier to sell to and are more profitable than new
customer loyalty customers. Customer loyalty can be viewed as a ladder showing the
ladder progression of relationships customers can have with an organization.

Figure XI: The Customer Loyalty Ladder

Partner: someone who has the

Partner relationship of a partner with
you
Advocate: someone who actively
recommends you to others,
who does your marketing for
you
Advocate Supporter someone who likes your
organization, but only
supports you passively
Client: someone who has done
Supporter business with you on a repeat
basis but may be negative, or
at best neutral, towards your
Client
organization
Customer:someone who has done
business just once with your
Customer organization
Prospect: someone whom you believe
may be persuaded to do
Prospect business with you

Source: Payne, 1994.

The first marketing task is to convert the prospect into a customer.

The next task is to generate repeat business with customer to make him/
her the firms client and then a supporter. The fifth level of the
presented ladder is an advocate being pleased with the services or
products he receives and eager to recommend them to others. The final
step on the ladder is a partner. This represents a situation where a very
close and long-term relationship is developed between a supplier and
customer, based on satisfaction of mutual needs.

52
 One of the practices increasingly applied in consumer marketing is
the maintenance of customer databases. The deployment of the customer
software by employees may really help them readily recall customer databases
characteristics and use this information in relationship building. But the
view of relationship marketing as database management is, however,
one-sided. The establishment and maintenance of databases does not
constitute an effort to forge true relationships. Databases can be used to
target customers, with the customer having little or no knowledge of the
company in question or the existence of the database. In addition,
databases are limited in the extent to which they can help manage
genuine relationships.
Managing the customer base means that the firm has at least some choosing the
kind of direct knowledge of how satisfied its customers are (Grnroos, right customers
1981). This requires means of gathering the various types of data about
customer feedback that are constantly obtained by a large number of
employees in large number of customer contacts. In combination with
market share statistics, such an intelligence system focusing on customer
satisfaction and customer needs and desires forms a valuable source of
information for decision making. Consequently, the firm can build up an
on-line, real-time information system. Companies should target the
right customers not necessarily the easiest to attract or the most
profitable in the short term but those who are likely to do business
withthe company over time. The challenge is to avoid as many of
thesepeople as possible in favour of customers whose loyalty can be
developed. The right customers are those to whom the best value can be
delivered by the firm over a sustained period of time.
According to statistical research people who buy because of aperso buying
nal referral tend to be more loyal than those who buy because of an behaviourS
advertisement. Those who buy at the standard price are more loyal than
those who buy on price promotion. Home owners, middle-aged people,
and rural populations also tend to be loyal, while highly mobile
populations are inherently disloyal because they interrupt their business
relations each time they move. Special promotions and other kinds of
pricing strategies aimed at acquiring new customers often backfire. Even
attempts to recover customers who threaten to leave are often a waste
of resources. Investments in service-quality improvements may be

 Customer segmentation is a tool used to create a type of intimacy in order to

serve clients better. This is possible thanks to the use of information technology.
Databases, which should include both qualitative and quantitative information
about the customers, are supposed to be the technical basis for relationship
marketing. Marketers can direct highly customized marketing to selected
customers.

53
 counterproductive when they are focused on customers the business
actually should get rid of the business of keeping them.
staff loyalty The external marketing (Figure XII) can not exist without the
internal marketing as customer loyalty cant be had without staff
loyalty.Internal marketing is needed to ensure the support of traditional
non-marketing people who have to be committed, prepared and
informed, and motivated to perform as part-time marketers (Carlzon,
1987).

Figure XII: The services marketing triangle

Company (management)

Internal marketing External marketing

Enabling the promise Setting the promise

Employees Customers
Interactive marketing

Delivering the promise

Source: Zaithaml and Bitner (1996).

The interaction marketing helps to arrange the proper service

encounters and deal with the uncertainty of the service process. While
external marketing is about setting the promise to customers, interactive
marketing is about delivering the promise, which is possible only
through the proper internal marketing.
Todays jobs are increasingly complex and require sophisticated
knowledge of customers, internal processes and technology. Thus,
company investments in hiring, training, and development, will only pay
off in superior productivity if employees stay and apply their knowledge
at the company.
Some managers question the wisdom of increasing pay by, say,
25% in order to decrease employee turnover by 5%. Yet the fact is that
employee retention is key to customer retention, and customer retention
can quickly offset higher salaries and other incentives designed to keep
employees from leaving. The loyal employee learns, over time, how to
serve the customer, and the loyal customer learns how to access the

54
business system in a way that makes it easier to be well-served. The loyal
stockholder learns how to anticipate ups and downs in the business and
doesnt induce behaviours that destroy long-term value in order to
ensure short-term accounting profits. A successful business is really
apartnership that includes customer, employee, and investor. [] When
any one participant overreaches, the system will collapse. (Reichheld,
1994).
Here we come to the next group the companys partners and partners loyalty
investors. In fact some researchers treat the relationship marketing very
widely including here not only relations with individual and institutio
nalexternal clients and internal companys relations, but also relations
with suppliers and even relations with local governments or local
communities. It is worth to notice that such an attitude to the relation
ship marketing concept could be especially useful when analysing the
complexity of tourism product (TDAs offer). However as far as the
external client constitutes the main source of companys income lets
concentrate on the relations with clients.
In a tourism sector the success of many tour-operators depends on
the well developed net of agents. Agent retention and customer
retention reinforce one another. The agent who is committed to a long-
term relationship with the company, and indeed, to his or her own
business, is more likely to build lasting relationships with customers.
Inaddition, loyal customers make life easier for the agents, who spend
more time working with people they know and like and far less time
chasing new customers. It then initiates a series of second-order effects second-order
that cascade through a business system as follows (Reichheld, 2003): effects of loyalty
Revenues and market share grow as the best customers are swept management
into the companys book of business, building repeat sales and
referrals. The best customers are those who have the highest inherent
loyalty because they understand and buy into the companys value
proposition. They are the companys best assets because of how long
they stay and how profitable they will become.
Costs shrink as the expense associated with acquiring and esta
blishing relationships with new customers and replacing old ones
declines. The long-term customers are much easier to serve because
they know the system and how to use it and have built up good
working relationships with loyal employees.
Employee retention increases because job pride and job satisfaction
increase, in turn creating a loop that reinforces customer retention
through better service. Increased productivity results from longer
employee tenure because of continued learning by the employees as
they gather experience in creating value for customers.

55
 Many researches point out that satisfaction and loyalty are affected
differently by the components of the suppliers marketing mix the
satisfaction seems to be affected mainly by the sales force of the supplier
through interpersonal relations, communication, cooperativeness and
promotional activities in the outlets (Biong, 1993). While satisfaction is
one determinant of loyalty, loyalty also is affected by determinants
signalling dependency, sources of power and stakes in the relationships,
e.g. quality products, strong brands, a unique product line, product
profitability, and a professional sales force.
zone of tolerance Customers seem to have a zone of tolerance, which can be defined
asthe difference between an adequate and a desired level of service
(Zeithaml et al., 1993). Customers are prepared to absorb some
unfavourable evaluations before expressing them in terms of net
dissatisfaction (Kennedy and Thirkell, 1988). It means that customers
may be dissatisfied with a service episode and still be satisfied with the
customers price relationship. One of the crucial effects of this strategy is that relationship
sensitivity marketing makes customers less price sensitive. It is possible due to the
creation of more value for customers than that which is provided by the
core product alone. Firms pursuing this system develop over time more
and tighter ties with their customers. If they are well handled they
provide customers with added value, something that is not provided by
the core product itself.
The aspects which enhance the relationship strength are, first of all,
the existence of bonds between the customer and the provider, which
function as switching barriers. Six different types of bonds have been
social bonds suggested: social bonds, technological bonds, knowledge bonds, planning
bonds, and legal/economic bonds. In addition to these bonds, consumers
may also have geographical, cultural, ideological and psychological
bonds to service providers (Liljander and Strandvik, 1995). The conse
quence of bonds is that the customer might accept lower levels of service
quality, compared with other service companies, without breaking the
relationship.
One way to facilitate the development of social (interpersonal) bonds
is to design the environment where the service takes place the service-
scape, in such a way that opportunities for interactions (both formal and
informal) between employees and customers are plentiful. In addition
to the environment, services marketers might consider how to design the
service delivery process to encourage employee-customer interactions.
This could include assigning an employee to a specific customer to
create an ongoing series of interactions.
commitment to the The second dimension relates to the customers and the providers
relationship commitment to the relationship. This commitment might be based on

56
customers intentions and plans for the future. The commitment refers
to adaptation processes which are the result of the parties intentions to
act and positive attitudes towards each other. There is a difference
between loyalty and commitment, as loyalty is regarded only as repeat
purchase behaviour within relationship (Liljander and Strandvik, 1995)
and commitment is defined as parties intentions to interact with each
other. This also means that customer loyalty is not always based on
positive attitude, and long-term relationships do not necessarily require
positive commitment from the customers.
Another important aspect is that the importance of the relationship
for customers varies significantly. Some customers may be very
committed to the relationship and for these customers the perceived
satisfaction with the relationship is very important. Others may find the
relationship basically unimportant and for those the satisfaction
component is not as important.

5. Tourism Product Quality a Complex Matter

Why quality in tourism seems to be such complex phenomenon?
Quality in tourism has many dimensions. As it was stated earlier all tourism quality
products are accompanied by some aspect of service, and most services dimensions
are associated with some physical items, either the service itself or the
provision of the service. (...) neither goods nor services are marketed;
what is marketed is a bundle of benefits, often including both tangible
and intangible aspects (Enis and Roering, 1981). A tourism package is
the total sum of goods, services and interactions which a tourist receives
at different points in time, and maintains as perceived memories of his/
her tourism experience.
It can be the holiday experience comprising both tangible and
intangible services that constitutes the core component of the tourism
product. Tourist satisfaction can be achieved only if a tourism firms core
offering is able to meet the expectations of the customer; peripheral
offerings thus essentially assist the firm in providing added attractions to
the core service. This differentiation of a core and peripheral within
arange of services is critical for the effective management of tourism
firms and customer satisfaction. As a result, the concept of service
packaging proffers various applications in the effectual management of
tourism services.
When we talk about quality in tourism we should decide whether we tourism
discuss the problem of service quality offered by the tourism enterprise enterprises versus
or quality of the destination area which is much more complex. tourism area

57
 Lets start with a single company. It is necessary then to concentrate
on four main parts:
service contact (employees, infrastructure),
the project of service (defining the needs of guests in comparison to
goals of company),
productivity of services (taking care of constant or improving quality
in conditions of rising demand),
organization and culture of service.
Services are performed when the producer and consumer come into
tourism service contact. This inseparability lends a further complication in that it
encounter inhibits mass production of the service. This situation is exacerbated
dueto the perishability of services, for example a seat in a restaurant
orabed in a hotel that is not used in one time period cannot be
accumulated for use at a future time. Aspects of these features of
services present specific problems for managers who must accurately
forecast demand to ensure effective capacity utilization.
The evaluation of quality systems of individual tourism enterprises
indicates that the lack of proper inputs combined with the unfavoura
blefeatures of the external environment in which these systems
operateobstruct the benefits that these systems could otherwise produce
(quality tourism products). The resources used by big tourism companies
for thedevelopment of advanced quality systems are therefore lost. In
the shortterm, the existing quality systems of individual tourism
companies may increase their competitiveness. However, in the long
term, lack of the ability to satisfy the needs of their customers may result
in a gradual decrease in the sales of tourism products offered by these
companies.
Increasing competition in the tourism market impels individual
tourism enterprises to focus on quality improvement as a source of
competitive advantage. Small tourism enterprises typically lack adequate
inputs and ability to manage effectively internal and external relation
ships in order to develop comprehensive quality systems. A majority of
big tourism enterprises have, however, developed modern quality
systems based on the concept of TQM (see chapter 10). Despite the fact
that their quality management processes are in most cases advanced,
comprehensive and consistent, they also face difficulties with achieving
total satisfaction of tourists. These problems result from inadequate
inputs and inability to secure quality relationships with the environment
in which the systems operate, which is associated with the nature of the
tourism product. Defining the quality and its determinants in tourism
industry seems to be even more complicated then in any other services
area. The tourism industry is composed of networks of independent

58
butinter-related service providers, such as airlines, hotels and tour
operators, functioning within a range of service industries. From
aservices management perspective, these tourism networks can be
described as packages of experiences consisting of both tangible and
intangible elements. Thus, the pre-sale tourists' expectations relate
mainly to the quality of the destination area rather than the quality of
services provied by tour operators and travel agents that operate within
a TGA.
Locating the tourism quality system within the TDA enables more
accurate identification of the benefits that the host area is in a position
to offer to various market segments. Required quality improvement
areas in terms of satisfying total customer expectations can also be
better recognized owing to the fact that the majority of components of
the total tourism product are consumed at a TDA. It is therefore easier
to close the tourism quality perception gap.

Figure XIII: Quality dimensions in tourism

Quality in tourism

Hardware Environment Software

Facilities Landscape Service

Functions Adverse effects / pollution Information

Aesthetical aspects Consumption of resources Hospitality

Source: Romeiss-Stracke, 1995.

Augustyn (1998) defines the tourism quality perception gap which

relates to the discrepancy between the views of the tourists and those of
the tourism organizations in respect to the quality of the tourism
product. While tourists perceive quality as satisfaction with the complete
tourism experience from the time they leave home to the time they
return (Medlik and Middleton, 1979), the popular tourism organizations
approach to quality in tourism limits tourists satisfaction to those
components of the tourism product that are provided by the organi
zation (Handszuh, 1996). For example, a tour operating company offers
a quality package composed of a seat in an airplane, a hotel room and
meals in a restaurant, and is interested only in the quality of those
components, as well as the quality of their own services. It should,
however, be noted that other factors, such as the quality of destination

59
 facilities, infrastructure, public transport, hospitality also influence
tourist satisfaction. In most cases, however, these factors are not taken
into consideration by individual tourism companies while searching for
information related to customers expectations and levels of satisfaction.
Therefore, even if the packages offered by the tour operators are of
topquality, the other factors may spoil the tourists overall experience.
A number of quality dimensions such as accessibility of services, service
orientation, freedom of choice, security and aesthetics, as well as
specifictourist activities such as shopping activities or the use of public
transportation seem to be perceived and evaluated very critically
(Weiermair and Fuchs, 1998).
tourism product The defining characteristics of the tourism product are such that they
characteristics present specific issues for practicing managers (adapted from Augustyn,
1996):
Supply-related:
the multisectoral and complex nature of the product which represents
a mixture of various elements (for example, the destination with its
facilities, attractions and accessibility);
the rigidity of the main elements of the offer that limit speedy
responses to changing consumer tastes;
the highly fragmented supply many businesses may contribute to
the overall experience;
the intangibility, inseparability and perishability of certain aspects of
the offer; and
staff issues tourism as people industry.
Demand-related:
high elasticity;
seasonality;
changing needs, attitudes and preferences of customers;
little brand loyalty; and
heterogeneous customer groupings.
enhance customer In order to enhance customer satisfaction, an individual tourism
satisfaction organization should adopt the same understanding of quality as its
customers. Consequently, the information needed for identification of
quality improvement areas should relate to all components of the total
tourism product and not only to those offered by the tourism company.
A majority of the companies do not have, however, sufficient resources
to develop and monitor complex information systems. Since the
information about customer expectations constitutes an important part
of the inputs to a quality system, shortcomings within this area give
riseto failures of quality systems developed by individual tourism
organizations.

60
 Tourists expectations of specific levels of service quality in tourism importance
partly stem from their own culture and prior socialisation, which can of tourists
predispose them to interpret factors influencing tourism destination expectations
choice and destination experience from a distinctive perspective
(Pikkemaat and Weiermair 1999). Different segments of tourists may
have both different expectations and attitudes regarding tourism services
and service quality. In addition, they may also perceive tourism
experiences and associated service quality differently, thus requiring
specific attention with respect to the differential development and
management of tourism products/services.
Managers want to have control over the factors that influence factors influencing
customers expectations, but some of those factors are uncontrollable. tourists
That is, e.g. the case for the factor perceived service alternatives from expectations
competitors. The factors that influence customers expectations of
service are often influenced by social trends. For example the new
service alternatives (i.e. the Internet) influence the service expected
from the traditional travel agent. The necessary changes in this service
must go far beyond the usual job of the travel agent. Managers in
atourism organisation are in a position to react to these trends in an
appropriate manner, depending on how they are viewed as a threat or
as an opportunity. If a manager objectively examines trends, then, he/
she is better prepared as a professional to take a leadership role in the
tourism sector, instead of being caught in a reactive or defensive
position.
Most tourism services are heavily dependent on word-of-mouth
recommendation. Publicity by WOM can have both positive and WOM
negative serious consequences at the macro level of the industry. recommendation
Indeed, the design of the tour package will not only influence customers
tourism experience, but will also affect the image of the destination and,
ultimately, the tourism industry as a whole. Consequently, tour
operators who manage mass tourism assume an important role in
maintaining the image and well being of the destination they serve
(Kandampully, 2000).
Quality is a global, but not easily definable, concept that applies to
tourist destinations, regions or nations, as well as individual private
enterprises. Most approaches have focused on individual providers of
tourism services, with the aim of helping them understand better the
needs of modern tourists, and to develop economically feasible products
and processes (Maylor, 2000). But a destination areas reputation for
hospitality, or (...) the manner in which visitors are received, and the
quality of service provided, forms a major component of a destinations
tourist image (Murphy, 1985). In order to attract and retain the

61
 customer, the tourism business must concern itself with attaining and
maintaining a constant level of service quality in terms of service
production and delivery. It is, however, important to bear in mind that
quality relates to customers perceptions, not the perceptions of those
who provide the service.
WTOs definition The most complex definition of the tourism product quality should
of tourism quality include these observings. Such definition was formed by World Tourism
Organization (WTO, 2004):

 uality in tourism implies to satisfy all the legitimate service

Q
requirements and expectations of the client at an acceptable price
whereby always conforming to the underlying quality determinants
such as safety and security, hygiene, accessibility, and harmony with
the human and natural environment.

WTO therefore defines quality as the central objective of tourism

development and identifies it with the quality of tourism experience for
both who visit and buy tourism service and those who receive visitors
and provide such services. Quality thus provides a basis for sustainable
tourism. It is again worth to notice that tourism quality in such a context
cannot be enhanced by an individual enterprise it needs the
involvement of tourism organizations or consortiums and should be
developed at national and local levels.

62
PART TWO: TOURISM ENTERPRISE
A CUSTOMER DRIVEN
ORGANIZATION

6. Customer Focus Whats New about It?

Allied to the notion of quality is the notion of customer orientation. The customer
argument is that it reflects the business climate of the 1990s, which orientation
demands a customer orientation in order to meet and exceed customers
requirements. The literature tends to focus on the extent to which the
tourism industry is customer oriented and the types of strategies they
must adopt in order to become so (Gilbert and Soni, 1991).
A long ago customers stopped buying anything what is offered. They customer - driver
want to buy products and services which they really need. The growing marketing
level of education make nowadays customers much more sophisticated
and innovative. It can be easily observed in the tourism market where
customers look for new products, enabling them to show their
individuality. In order to keep and attract new customers it is necessary
to establish their needs and expectations. The marketing strategy has to
be customer-driven (Mohanty, 1995).
The ever-spreading idea of quality management may be viewed as
aprocess by which a company concentrates its total resources on the
task of satisfying customer requirements in terms of value for money,
reliability and fitness for purpose at a minimum cost. The idea of quality
management influenced the marketing activities. Typical features of the
modern marketing management are not only an interest in the customer
but also in the customers interaction with the providers personnel in
delivering the service creating value.
QM is a managing system based on never-ending improvement in
order to satisfy customers demands. This satisfaction should be treated
as an investment as profits are not supposed to appear immediately
(Mohanty, 1995). Of course, it does not mean resigning from budgeting
principles and thinking in profitability categories. QM is not aimed at employees effect
the higher volume of sale. Quality-oriented managers keep it in mind to on customer
lower the costs. In service companies (especially in the tourism sector) loyalty
one of the most burdening positions of costs constitutes the workforce.
Traditionally this cost used to be cut very simply the layoffs. Managers
tend to forget that the longer employees stay with the company, the
more familiar they become with the business, the more they learn, and

63
 the more valuable they can be. Employees who deal directly with
customers day after day have a powerful effect on customer loyalty.
Acustomers contact with a company is through employees, not the
topexecutives. It is with employees that the customer builds a bond of
trust and expectations, and when those people leave, the bond is broken.
The idea is to gain customers loyalty through the best service. This can
be done only when employees are eager to serve clients in a perfect way.
This leads us to the conclusion that quality management does not start
the concept at the level of company-customer interaction. Its roots reach deeper to
of internal the level of human resource management (HRM). The customer in
marketing thisconcept is not only the external user of the product or service, but
isalso the next person to use the work of any company employee
(Mohanty, 1995).

Figure XIV: The Quality Chain

outside organisation

final customer

supplier/
customer
supplier/
customer
supplier/
customer
supplier/
customer
supplier/
customer

external supplier

outside organisation

Source: Ho (1994).

There is a series of supplier-customer relationships (Figure XIV),

quality chain which serve as an important interface in the quality chain. Failure to
meet requirements in any part of a quality chain will affect the other
parts (Oakland, 1993), what means that the quality chains may be
broken at any point by one person or process not meeting the customers
(internal or external) requirements. The ability to meet the customers
requirements is vital, not just between the company and external

64
customers, but within the organizations internal customer/supplier
relationships it helps to avoid breaking the quality chain.
The notion of improving service quality by attention, primarily, to the customer care
social and behavioural elements of customer service encounters, is the initiatives
basis of a number of so-called customer care initiatives. Five types of
care can be distinguished (Horovitz and Cuddennec-Poons, 1990):
quality care, customer care, flip care, communications care, lead care.
By quality care they mean establishing, in the organization, a shared
definition of the meaning of service quality. Customer care places the
prime focus of quality improvement on the interaction which takes place
with the customer. Front-line people care, abbreviated to flip care, is
about helping and equipping the employees who are exposed to the
public to provide the service. Communications care requires attention to
avoiding misrepresentation of service quality in any way which might
lead to false expectations. And finally they mention lead care, which they
suggest is about management providing and showing leadership and
commitment.
The focus on customers and employees can not stay an empty slogan
tailored to an annual management meeting. In the new economics of
service, frontline workers and customers need to be the centre of
management concern. Successful service managers pay attention to the
factors that drive profitability in this new service paradigm: investment
in people, technology that supports frontline workers, revamped recru
iting and training practices, and compensation linked to performance
for employees at every level.

7. Customer as Co-Producer of Value

7.1. Customer Defined Quality.

One field largely ignored by traditional quality control and assurance
activities is the marketing discipline. Quality management opened the
way to involve the marketing discipline in quality issues. IBM has
stressed its corporate vision development in seeking to satisfy customers
through market-driven quality (MDQ) as it was summarized that
customers buy on value; they do not simply buy products. It is value that
attracts customers to particular firms, and delivers competitive
advantage to that firm. The process of value creation needs to be
understood, if it is to be managed and enhanced. service quality
Customer satisfaction is important for success as consumers make as customers
extensive use of personal sources of information when buying services. experience

65
 Additional elements of service augmentation, for example accessibility
and convenience, must also be managed to provide a complete offering.
Quality is incapable of measurement, for quality as a characteristic exists
as it is perceived by the consumer (Callan, 1989). Service quality then is
basically perceived as the customers subjective interpretation of their
experience. The production of services requires a higher degree of
customization than that of manufactured goods a service must be
provided to an individual customer. Customer needs and performance
standards are very difficult to identify. The customer and the service
employee need to interact for delivery of the service to be complete.
actual versus At the time of purchase, the customer decides if expectations have
expected been met by comparing the perceived performance with the expected
performance performance. This usually forms the basis of a decision to purchase, and
determines purchase satisfaction. After the purchase of the supplies, the
customer becomes aware of the actual performance; and user satisfaction
is the result of comparing the actual performance with expected
performance.
anticipating Evidence suggests that successful organizations are able to diagnose
customers needs their customer expectations fully and satisfy them completely, during
each and every service encounter (Zemke and Schaaf, 1990). In
anattempt to delight customers tour operators, accommodation,
restaurants must attempt to get as close to them as possible so that they
are better able to anticipate and thereby meet their needs. The idea is to
stay ahead of the customer, to anticipate his/her needs so that when
he/she articulates the needs service suppliers have already planned for it
and are ready (ahead of the competition) to meet it (Bank, 1992).
customers Service staff must be supported by an appropriate service infrastruc
feedback value ture that enables them to succeed. This requires that an organization
have effective systems and procedures in place to ensure that the
services it provides constantly focus on meeting the customers needs. It
is clear that the customer has a major role to play in the creation of
aquality product; unless the customer has an accurate requirement, and
reasonable expectations, the transaction will be ineffective in some
form. The customer feedbacks is a main source of information about
tourists requirements.
Managers should therefore seek to understand their customers and
appreciate the extent to which different quality dimensions are
prioritised. High contact customers will have more interrelationships
 Accessibility has been found to be particularly important in choosing a tourist
agency. This is defined in terms of convenience of location, hours of operation
and number of branches. However it should be noted that not all services require
the presence of the customer (making reservations via Net).

66
with employees who, as a consequence, will need to be suitably trained
in people skills. In contrast low contact customers may have greater
affinity with the tangible components of the servicescape.
Many service organizations such as airlines, banks and hotels have
well developed quality assurance systems. Regretfully, most of them are
generally based on industrial system analogies and tend to be more
product oriented than service oriented. For instance a typical hotels
quality assurance system is focused on technical standards such as
properly made up rooms. However, service organizations have special
requirements that manufacturing systems cannot fulfil, therefore they
must go beyond product orientation and include customer service
transaction as well as employee performance and behaviour.
There are several points that service organizations should consider the critical value
when it comes to instituting quality assurance systems (King, 1984). The od customers
quality characteristics that should be controlled may not be the obvious perceptions
ones. Customer perceptions are critical and it may be difficult to define
what the customer wants. For example, speed of service is an important
quality characteristic, yet perceptions of speed may differ significantly
among different service organizations, such as restaurants.
Behaviour is a quality characteristic. The quality of human inter behaviour
action is a vital factor in every service transaction that involves human as quality
contact. For example, travel agencies have found that the friendliness of characteristics
tellers is a factor in retaining clients.
Another quality characteristic is companys image a major factor in companys
shaping customer expectations of a service and in setting standards by image as quality
which customers evaluate that service. A breakdown in image can be as expectations factor
harmful as a breakdown in delivery of the service itself.
Expectations represent the level of service consumers believe they
will receive in a given service encounter. Expectations are influenced by how expectations
a wide variety of information sources (advertising, physical cues, etc.). rise
They are also specific to individual firms as consumers will expect
varying levels of service from various firms within a given industry (e.g.
consumers expect a better product in Marriott then in any even 5-star
local hotel). What are the antecedents of expectations then?
First of all consumers expectations result from the perception of
various pieces of information that are relevant to a service industry or
service firm. This information originates from: 1) individual-specific
sources, 2) pre-encounter sources, and 3) intra-encounter sources (Liu
et.al., 2000).
1) Individual-specific information sources vary across individuals and individual specific
may lead different individuals to expect different levels of service in information
similar situations. They include such variables as an individuals sources

67
 personal service philosophy (i.e. individuals beliefs about how
services should be performed and how service employees should
conduct themselves), transitory service intensifiers (i.e. personal
emergencies that lead individuals to need and expect a higher level
of service), personal needs (i.e. physical, social, or psychological
needs), perceived service alternatives (i.e. an individuals perception
of the number of providers that can perform a given service), and
self-perceived service role (i.e. an individuals perception of how
much their own actions affect the delivery of the service).
pre-encounter 2) Pre-encounter information sources are biased and unbiased
information informative stimuli that are received by consumers before a given
sources service encounter that lead consumers to expect various levels of
service performance. Biased, pre-encounter stimuli are those pieces
of information that firms disseminate to solicit business (e.g.
advertisements, brochures, Web sites, etc.). These biased sources of
information have been shown to be particularly important to the
formation of expectations when consumers lack other sources of
information (Hoch and Ha, 1986).
Unbiased, pre-encounter stimuli are sources of information that do
not originate from the service firm, and are likely to be seen as more
credible sources of information. Unbiased, pre-encounter informa
tion sources include previous experience with the service firm or
service category, personal word-of-mouth (i.e. from friends and/or
acquaintances), and third-party information (i.e. consumer reports,
news broadcasts, etc.). While consumers rely heavily on word-of-
mouth communications to form expectations, this source of infor
mation has been shown to be particularly useful when the source of
information is closely related to the recipient (Oliver, 1987).
intra-encounter 3) The list of intra-encounter factors is a little longer:
information As consumers interact with representatives of the service firm, the
sources physical environment of the service encounter and other consumers,
they are the targets of a great many information sources, influencing
their expectations. The sources include the delivery of the core service,
company communications10, implicit service promises, situational
factors11, price and brand name.
10 Company communications consist of any information explicitly communicated
to the consumer during the service encounter. Examples are service claims made
by salespeople, signs that provide information about some aspect of the service,
etc. This information is similar to biased, pre-encounter antecedents because it
originates from the company and consumers may question its credibility.
11 Situational factors are random events that are perceived by consumers to be

beyond the control of the firm, and that temporarily affect the firms ability to deliver
the service. Situational factors include random over-demand for theservice, natural

68
 Another important aspect influencing the customers experience is
the environment in which a service transaction takes place, also termed
the servicescape (Bitner, 1992) and including ambient and spatial servicescape
conditions as well as the signifying nature of artefacts. The term
servicescape connotes a more or less contrived scenario, echoing the fact
that some front-line service encounters are scripted and that services
actually impress upon their employees the existence of a front and
back stage. Servicescape is not always controllable (e.g. North
American wilderness). Sometimes the environment is chosen, rather
than designed. It is not controllable in the same sense as a hotel
reception area or a store interior.

7.2. Customer Effects on Service Quality

Customers have a role as a co-producer of value and a partner customer as
(Gummesson, 1997, p. 269) within service encounter. Tourism areas, co-producer
hotels and means of transportation have the potential to attract large
numbers of diverse groups of customers and, while this does not
necessarily lead to incompatibility, managers should be aware of the
criteria which delineate segment membership and whether certain
segment mixes are incongruous. Because tourists are invariably in close
proximity to each other and often share time, space and service utensils,
there is potential for both positive and negative interactions. Inter
relationships between customers will therefore impact service quality
evaluations, as will interactions with staff and the physical elements of
the offer (servicescape).
Service experiences are the outcomes of interactions between organi
zations, related systems/processes, service employees and customers. In
many services customers themselves have vital roles to play in creating
service outcomes and ultimately enhancing or detracting from their own
satisfaction and the value received. Customers themselves participate in
creating the service and ensuring their own satisfaction (Bitner et al.,
1997).
The heterogeneous nature of tourists has the potential to contribute inter-customer
to the quality gap through the impact which particular groups of conflicts
customers may have on one another. So called inter-customer conflict
may result from the fact that tourists differ in terms of language, food

catastrophes, bad weather, etc. (Zaithaml et al., 1993). Situational factors are likely
to reduce the level of service consumers believe they will receive. For example, consu
mers in a crowded restaurant will not expect to be served very quickly. However, as
normative expectations represent the level of service consumers expect under more
ideal circumstances, they are unlikely to be affected by situational factors.

69
 requirements, values and behavioural norms, as well as specific service
needs. Customers are in close physical proximity to each other (all
activities take place in a relatively small area of land or the same
building hotel or restaurant), customers are engaged in numerous and
varied activities (many sport options are available together with bars,
restaurants, shops, hairdressing, car hire, etc.), they must occasionally
wait for service (there is potential for delays to occur in relation to any
of the above facilities); tourists are expected to share time, space or
service utensils with each other (e.g. the sport facilities such as pools,
courts, etc.); and the service environment has the potential to attract
aheterogeneous customer mix. Management seeks to address these
potential difficulties. They could be partly limited by a process of first
attracting homogeneous consumers to the service environment. E.g.
families with young children will require different types of support
services, and place differing emphasis on the need for physical, inter
active and corporate quality (Thwaites, 1999).
One of the example areas of potential conflicts in tourism resorts is
example areas of aquiet period between midnight and 07.00, usually intended to reduce
potential conflicts noise levels. This requirement appears to be ignored by many guests
who return to their apartments from the bars and discothques early in
the morning or who sit talking on their balconies until the early hours.
Itis necessary to recognize the difficulty and position security staff to
minimise the noise situation and manage the delicate balance between
heavy policing and allowing some customers the freedom (Thwaites,
1999). Similar potential areas of conflicts among customers is for
example, the relationship between smokers and non-smokers, time share
owners and one-off visitors or different cultural attitudes to dress codes
such as topless sun-bathing.
The level of customer participation in a service experience varies
levels of customer across services as shown in Table VII. In some cases, all that is required
participation is the customers physical presence (low level of participation), with the
employees of the firm doing all of the service production work, as in the
case of a symphony concert. In other cases, consumer inputs are
required to aid the service organization in creating the service (moderate
level of participation). Inputs can include information, effort or physical
possessions. When choosing a holiday offer in a travel agency or staying
at SPA tourist has to be very active and provide the service enterprise
with quite a detailed information about his/her requirements. In some
situations, customers can actually be involved in co-creating the service
(high level of participation). For such services, customers have essential
production roles that, if not fulfilled, will affect the nature of the service
outcome. All forms of education, training and health maintenance fit

70
this profile. Unless the customer does something (e.g. studies, exercises,
eats the right foods), the service provider cannot effectively deliver the
service outcome. Within the sector of incentive travels, similarly, an
organization seeking training services for its employees will need to help
define the nature of the training, identify the right employees for the
training, provide incentives for them to learn and facilitate their use
ofthe training on the job. If the organization does not do this, the
employees involved will not receive the full benefits of the service.

Table VII: Levels of customer participation across different services

Low: Customer High: Customer

Moderate: Customer inputs
presence required co-creates the service
required for service creation
during service delivery product
Products are Client inputs customize Active client
standardized astandard service. participation guides the
customized service.
Service is provided Provision of service requires Service cannot be
regardless of any customer purchase created apart from the
individual purchase customers purchase
active participation
Payment may be the Customer inputs
only required customer (information, materials) are
input necessary for an adequate
outcome, but the service
firm provides the service
Examples:
End consumer:
Airline travel Hair cut Marriage counselling
Motel stay Annual physical exam Personal training
Fast-food restaurant Full service restaurant Weight-reduction
programme
Business-to-business
customer:
Uniform cleaning Agency-created advertising Management
service campaign consulting
Pest control Payroll service Executive management
seminar
Interior greenery Independent freight Install wide area
Maintenance service transportation network (WAN)

Source: Bitner et al. (1997).

Within the levels of participation just discussed, customers can play

avariety of roles (Bitner et al., 1997):
the customer as productive resource;
the customer as contributor to quality, satisfaction and value; and
the customer as competitor to the service organization.

71
 Customers as productive resources
customers as For over a decade, researchers have advocated that organizations
productive view service customers as partial employees (Bowen, 1986, Mills and
resources Morris, 1986, Mills et al., 1983). It recognizes that customers contribute
inputs, much like employees, which impact the organizations producti
vity both via the quantity and quality of those inputs and the resulting
quality of output generated. For example, in contributing information
about their requirements and the level of satisfaction hotel guests are
part of the service production process. Passengers of the sea cruise
constitute a part of the product influencing their co-passengers, creating
the atmosphere of the cruise being more or less eager to take part on
recreations offered aboard the ship etc.
gaining Gaining the customers co-operation is also necessary for success in
customers service operations in a more practical way. There is a lot of tasks which
co-operation can be transferred from the service providers role to the customer
(Lovelock, Young, 1979). Providing drinks-making facilities in place
ofroom service in hotels is a well accepted example of customers
performing functions for themselves, so that the company can reduce
costs and overcome staff shortages. It is important for customers
expectations to be suitably conditioned before changes are made and
that the procedures are made simple and relevant. In order to increase
customer participation successfully, employees need to become effective
in demonstrating new procedures and technology (e.g. sauna service).
Itis also necessary to ensure that customers do not feel that the tasks
they undertake are unequally distributed, and hence they should be
based on a good understanding of consumer needs and characteristics.

Customers as contributors to quality

Customers can influence both the quality and quantity of production.
Some experts even believe that the delivery system should be isolated
customers as asmuch as possible from customer inputs in order to reduce the
contributors to uncertainty customers can bring into the production process. This view
quality reasons that the less direct contact there is between the customer and
the service production system, the greater the potential for the system to
operate at peak efficiency. The introduction of ATM machines and
automated customer service telephone lines in the banking industry,
online booking in hotels, are both examples of ways to reduce direct
customer contact in that industry, resulting in greater efficiencies and
reduced costs.
Other experts believe that services can be delivered most efficiently if
partial customers truly are viewed as partial employees and their participative
employees roles are designed to maximize their contributions to the service

72
creation process. The logic in this case is that organizational productivity
can be increased if customers learn to perform service-related activities
more effectively. The extreme case would be full self-service where
thecustomer produces the service for him or herself with very little
intervention or support from the organizations employees. Hotel
restaurant quite successfully use this approach when offering the buffet
breakfast, American lunches or salad-bars.
Some customers simply enjoy participating in service delivery. They
enjoy using the computer to obtain airline tickets, or they may like to
arrange their holidays personally through the Internet. In some cases,
there is a price discount advantage for self-service, but other times,
customers may be motivated by convenience, a sense of greater control
over the service outcome, timing of delivery, or simple enjoyment of the
task (Dabholkar, 1996).
Tourism, as a service offering, entails tourists intimate participation
with the organization, its employees and other fellow tourists at various
stages of the production and consumption process. Hence, from an
operational management perspective, it is important that managers of
tourism services understand the importance of tourists involvement
inthe various activities. This understanding will assist managers to
streamline their operations to enable them to enhance the quality of the
tourists experience by incorporating the activities that they enjoy most
(Kandampully, 2000).

Customers as competitors
A final role played by service customers is that of potential
competitor. In many situations, customers (whether individuals or customers as
companies) have the choice of purchasing services in the marketplace or competitors
producing the service themselves, either fully or in part. Customers in
asense are competitors of the companies that supply the service (Lusch
et al., 1992). For example, a car owner who needs maintenance on his
car can choose to do all his own maintenance (assuming he has the
skills), to have someone else do all the maintenance tasks, or to do some
tasks himself (e.g. changing oil). Parallel examples can be imagined for
child care, landscaping, home maintenance, and of course for the
tourism industry. Individual customers planning the trip around the
world may prefer to arrange it themselves or look for a ready product of
any tour-operator. A company intending to arrange an incentive for its
employees may not wish to outsource the product in a professional
incentive travel agency.
The organization should ask what types of information and education
it may need to share with its customers, and how it might develop

73
 approaches for training and rewarding its customers for effective
participation. Approaches for monitoring the quality of customer contri
butions, providing feedback to guide improvement or offer encour
agement, and rewarding customers for effective participation can be
implemented.
the servunction The servuction system model (Figure XV) highlights that the service
system model organization comprises two parts (Bateson, 1995). The invisible aspects
of the business are inextricably linked to the visible aspects that are
represented by the inanimate physical environment in which the service
encounter takes place and the contact staff who actually deliver the
service. Recreation clubs, hotels and resorts are examples of services
where customers spend lengthy periods of time in the physical surround
ings of the service provider (servicescape). Accordingly the perceived
quality of the servicescape will influence the desire to stay in the facility
for an extended period which in turn may affect spending patterns.
There are some perspectives in relation to the planning of service
facilities, viz. operational, locational, atmospheric/image, consumer use
and contact personnel. A key requirement for the delivery of service
quality is the integration of these perspectives to ensure compatibility
(Thwaites, 1999).

Figure XV: The servuction system model

Customer
A
Inanimate
Environment

Invisible
Organization
and System
Contact
Personnel or
Service
Provider Customer
B

Invisible Visible

Bundle of Service
Benefits Received by
Customer A

Source: Bateson (1995).

74
 The servuction system model presents also the interrelationship
between customers and the impact that this can have on service quality.
The customers experience, therefore, is created through a variety of
sources, some of which are outside the control of the organization.
As to sum up the customer roles are as follows:
Provision of explicit services can be recognized in three forms: self-
services, which require roles such as drinks making in hotels, and
self-service in restaurants and supermarkets: services to other
consumers, for example participation in a seminar or syndicate
group; and services provided for the organization, like returning
supermarket trolleys or library books.
Creation of the environment; in restaurants and bars the atmosphere
is partly due to other customers.
Training other customers. Johnston considered that one customer's
conduct was adopted by others and thus was a form of training.
Provision of information. Customers need to specify their require
ments and provide feedback about their level of satisfaction, and
even to show when the service has been completed.
Service firms need to manage these customer roles using a similar
approach to the management of employees (Johnston, 1989). This will
probably include deciding what sort of customer is wanted and how to
go about customer selection. It will also be necessary to provide the
customer with mechanisms, both equipment and procedures, to help
them to select the correct course of action. Service firms will need to
have ways of dealing with customers who do not "fit". This might require
either removing them, or changing their expectations, or, in the long
term, changing the service provided. Training of customers by explicit
action of service employees, or through the example of more expe
rienced customers, is another necessary function, as is motivating and
rewarding customers.

7.3. Complaint Management

In the previous chapter we discussed a few ways of customers partici
pation in companys efforts toward creating high quality services. There
is one more way of customers participation in quality enhancement
making complaints.
Failures usually teach us more than successes. Failure is a problem the value of
only if the root causes are not analyzed and used for organizational failures
learning. Airlines, operating in an extremely complex and dangerous
environment, exceed the highest standards of quality control by
spending millions retrieving and analyzing the flight recorder (black

75
 box) carried on every airplane to determine what caused a crash
(Reichheld, 1996). Looking at our failures is painful, personally and
organizationally. But failure shows us which link in the chain has been
broken. A defect stands out as a clear, understandable message, telling
an organization exactly where improvements are needed.
WOM Various studies indicate that upset customers may tell, on average,
communication 1020 people about their experience. With the increasing use of the
Internet in the new millennium, communication among customers will
soar. This reality of word-of-mouth and the expectation of spreading
on Net has led many service practitioners to place renewed focus on
customer complaint behaviour and customer complaint management
(Liu et al., 2000). WOM communication is generally recognized as one
of the most effective marketing tools in services.
Effective complaint management can lead to significant improve
ments in the number of customers retained (through its effect on
behavioural intentions) and on the number of new customers recruited
(through its effect on WOM). Consumers use information perceived
during service encounters to update their expectations, and these
expectations are the drivers of consumers service evaluations. The
expectation updating process has significant implications for the
consumers quality perception and behavioural intentions toward the
present service encounter, future service encounters and WOM
communications.
management of The management of complaints is sometimes part of this extended
complaints as service encounter as, for example, when a restaurant decides to provide
extended service a client with a replacement meal for one that has proved to be un
encounter satisfactory, or when a hotel decides to change the room for a guest who
is not satisfied with his or her original allocation. The way in which
complaints are managed should not only cover up or fix problems, but
should also help to reinforce, in the customers mind, the strengths of
the company. With services such as amusement parks, hotel stays and
restaurant meals, where the service encounter takes place over an
extended period of time, customer expectations of quality can change
while the service itself is being delivered. This provides companies with
the opportunity to re-emphasize their strengths while they are delivering
a service.
By measuring complaints systematically and designing procedures
and measures that communicate the seriousness of complaints to all
employees, the organization sends a strong message to employees and
customers that it wants to know what problems are created, will follow-
up on those problems, and wants customers to know that the problems
will be solved and the factors that created the problems will be fixed.

76
These characteristics of good complaint management all contribute to
a culture of concern over fixing problems and addressing complaints
that distinguishes successful organizations from unsuccessful ones.
Some research show that managing complaints well and recovering recovering
customers, i.e., dealing with them after a service failure and (usually) customers
acomplaint, influence not only customer satisfaction but also repurchase
intentions, customer trust and commitment, and long-term relationships.
Good recovery and complaint management have a positive impact on
staff attitude and staff retention, process improvement and, arguably
more importantly, on profit (Johnston, 2001).
Johnston and Mehra (2002) enumerated the best-practice complaint best-practice
management principles: complaint
1. It is well accepted that speed of response is vital. No matter who management
responds to complaints, response should be rapid. During the reso
lution process, the complainant should be kept informed of progress
toward resolving the complaint. The case-study organizations
provide a speedy response to complaints, usually they acknowledge
within 24hours and, within five working days after an investigation,
provide a full reply with an explanation of the causes and details of
actions to be taken.
2. Take complaints seriously. Complaint procedures should be easily
understood (for the complainant and the staff) and easily accessed.
Complainants should clearly understand what they should do to
register a complaint, and staff should clearly understand what they
should do to respond. Accessibility means that for the customer,
asingle point of contact should be sufficient to register the complaint
and get the procedure for resolving the complaint underway. If
possible, staff should be empowered to resolve the complaint.
Customers do not want to hear, Ill have to ask my manager and get
back to you.
3. Complaints are the tip of the iceberg. Managers at each organization
were convinced that for each complaint there were many more
unhappy customers that they did not know about. The respondents
were uniformly of the opinion that they needed to encourage
customers to complain and to make it as easy as possible for them to
do so, because this alone gave them the opportunity to convert
unhappy customers into loyal ones.
4. It is critical that organizations not only encourage complaints but
also choose appropriate methods of doing so. Systems are to be put
in place to make complaining as easy as possible. Some of the
organizations rely on leaflets and posters informing customers that
comments of any sort are welcome. Sometimes customers are

77
 reluctant to complain because of fears about the implications for
their further treatment, especially in case of the long-term contact
with an organization (stay in a hotel, aboard the cruise ship, in a sea
resort etc.). To combat this reluctance, the organization should
devise a separate system whereby tourists could register their
comments without being recorded as complainants.
5. Encouraging customer complaints and making it easy for customers
to register their dissatisfaction also has the benefit of letting the
organizations know quickly when something is going wrong. This
enables them to react immediately before other customers notice
the same problem. Immediate reaction is also positively marked by
the complainants and may result in their overall satisfaction. This is
one of the points of successful quality management be able to
reverse the negative observations into the positive ones.
6. Rewarding staff to encourage or collect complaints is not necessary
but requires a no-blame culture that accepts mistakes and makes
complaints a normal but positive part of organizational life. One
common feature of the organizations was an acceptance that not
only were mistakes inevitable but that they were also acceptable,
except where repeated mistakes were being made. This encouraged
staff to take initiatives to satisfy complaining customers and to look
for solutions without first thinking about whether they might be
punished for going outside their job descriptions (although there
were limits as to what staff were allowed to suggest).
7. Organizations should have follow-up procedures to check with
customers to see if the resolution was satisfactory. While many
organizations recognize the value of follow-ups, closure is a different
matter. Closure is concerned with the process and its outcomes for
both the customer and the organization. Closure is the opportunity
to ensure that the customer is, in fact, happy with the outcome and
also that the organization has made changes, where appropriate, to
its systems or procedures to ensure that the problem does not
recur.
8. The need for top-level support of complaint management is not
asurprising finding, but top-level proactive involvement in a variety
of aspects of complaint management presents a challenge to many
senior managers.
9. Complaints are not always concerned with operational issues. Many
of them expose cross-functional and strategic issues that can be dealt
with only at a senior organizational level. Information from
complaints needs to be incorporated into strategic planning systems.
Measurements of procedural effectiveness should assess whether the

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 causes of complaints have been reduced, rather than simply whether
the volume of complaints has been reduced
10. Excellent complaints management requires both a centralized and
decentralized approach, though the allocation of tasks may vary. At
the minimum, decentralized units should be used to collect infor
mation and deal with customers where they can, and centralized
departments should be responsible for analysis of trends with overall
responsibility for policies.
11. Reports of complaint issues and learning points need to be widely
circulated throughout an organization. Real improvement needs
acommon understanding of the issues and problems.
12. Customer complaints should not be the only source of information
to help drive improvements. Employees should be used as a major
source of ideas.
13. The acid test that should be applied to all complaint-management
systems is whether or not they result in action and lead to improve
ments for the financial benefit of the organization (for example,
through the reduction of costs and time spent dealing with problems)
and for the benefit of customers (for example, by preventing
dissatisfaction from recurring). Knowledge of these benefits provi
des the motivation for staff to deal with complaints in a positive
manner.
14. Motivation for senior management should be provided by infor
mation about the financial costs and benefits of complaints, so it is
important that organizations are able to develop means of assessing
the financial impact of complaints and the value of improvements
that should result from them.
The opportunity to convert a dissatisfied customer into a loyal
advocate, and therefore reap the rewards of retention and referral, was
quoted by all the organizations as one of the basic reasons for managing
complaints well.

8. The Employee as Internal Customer.

8.1. Internal Clients Need Internal Marketing

Various models have been proposed that revolve around the concept customers within
ofcustomers existing within the boundaries of the organization. This the organization
basic principle of internal customer service posits that every person/
department in an organization exists to serve someone, whether that be
the external customer or another department (Farner et al., 2001). If

79
 youre not serving the customer, your job is to serve somebody who is.
(Albrecht, 1992). Individual units or departments need to view them
selves as both customers and suppliers. They receive inputs from
another department (their supplier), add value, and send the output of
their work to another department (their customer). Processes can be
improved, and thus quality improved, if each department treats the
people who receive the outputs from their work as customers.
The basic assumption is that if everybody strives to provide their
internal customer with better service, then the end customer will
receive higher quality service. The quality of service rendered to external
customers is very often a reflection of the quality of service rendered
internally to partners, colleagues and/or associates, according to the
unhappy assumption that unhappy employees cannot create happy customers.12
employees For many this has led to a direct inversion of the traditional organi
= unhappy zational hierarchy where the internal customer is now regarded as
customers themost important organizational resource in the pursuit of service
excellence. Naturally this requires action on a number of fronts, namely:
recruitment, selection, training and development, empowerment, staff
motivation and reward, the principal objectives being customer
satisfaction and retention through the removal of barriers to improved
employee performance.
quality of people More than any other factor it is the quality of people, both front and
as a success factor back of house, which will determine success as defined at this moment. It
is people, aided by techniques, methods and systems, that deliver the
right level of customer service. This implies that they must want to do so,
be empowered to do so and gain satisfaction from giving and improving
good customer service. As a result, many service organizations are now
investing heavily in the development of an internal service culture where
employees are now viewed as customers in their own right.
The first classical documented example of an internal marketing
internal strategy was implemented by Scandinavian Airline Systems (Carlzon,
marketing strategy 1987). John Carlzon, president of SAS, believed in empowering his
front-line people to take the necessary action to satisfy external
customers at the organisation-customer interface. He implemented
adecentralised decision-making system that flattened the organisational
structure, thereby facilitating quick and direct response to customer
needs (Carlzon, 1987).

12 To be able to do a good job, the service personnel who are in customer contact
need not only to be well trained, but also to be happy about their work. These
considerations encouraged Marriot to pay attention to managers individual
development, fair treatment procedures for handling disputes, and career
progression programmes.

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 Internal marketing should create an internal environment which proper internal
supports customer-consciousness among the personnel (Grnroos, environment
1981, p. 327). This can only be achieved if front-line people are treated
the same way as customers. The term internal customer evolved in
part from both the process and continuous improvement perspectives.
Abroadened concept of internal marketing includes: internal
the retention of skilled people in the organization, by counteracting marketing
declining management standards and providing clear corporate and elements
personal direction;
relationships with the management team who share the objectives,
experience and skills to build, release, and mobilise individual
motivation for economic recovery;
the proper understanding and need for quality for competitive service
delivery in a changing economic, social, political, and technological
environment;
building a corporate brand which appeals to both customers and
organization members;
communication management with a clear strategy based on research
and evaluation, and personal skills development and responsibility;
and
productivity through participation requiring leadership, processes
and commitment from all. (Varey and Lewis, 1999).
The concept of internal marketing regards providing jobs that providing jobs
satisfy the needs and wants of employees as the internal equivalent of that satisfy the
products (Thompson et al., 1978). The equivalent of market research, needs
market segmentation, and advertising should be used within the
organization. These can:
provide information about supervisor effectiveness as well as
employee preferences;
help to pay attention to individual needs;
shape expectations and provide a motivational stimulus. (Dotchin
and Oakland, 1994).
Not all the researchers are sure about the sense of internal customer
concept. In commenting on Albrecht's phrase (1992) if you're not
serving the customer, your job is to serve someone who is, Harari
(1991) proposes changing it to if youre not serving a customer, maybe
youd better start. He gives three specific reasons why focusing on
internal customers will actually hurt the organization. The first is that it
diverts attention away from the real customer who pays the bills. The
second reason is that the basic principles associated with the internal
customer concept can foster a climate of turfism, meaning that
departments are again not focused on the customer who actually

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 produces the revenues. Those employees or departments that have
nocontact with the paying customers can easily slip into the mentality
that as long as they can document service to an internal customer,
theirservice must be legitimate and necessary. Finally the concept of
department B taking inputs or resources from department A, then
passing them on to department C has negative consequences associated
with waiting, reworking, fingerpointing, and backstabbing.
That is why Harari (1993) claims: Dont call them [employees]
customers. Real customers purchase goods and services. Even though
all three constituencies (clients, employees and investors) must be well-
served, it is the external customer who must be considered first among
the mobility equals because all cash flow originates in the customers wallet. Of the
of external three groups, the external customers loyalty is the most mobile; they
customers loyalty generally have the least emotional and financial capital invested in the
company and usually can go somewhere else with minimal effort.
However the idea of internal marketing, creating loyal, effective and
competent employees, can not be neglected. The external customer
votes with money choosing this enterprise or another. The internal
clientcannot vote this way, actually there is no way for him to protest
whenever he feels overworked, observes wrong stuff decisions, suffers
from the lack of empowerment etc. Those factors if occur may cause
thedecrease of quality. If internal marketing is neglected, external
marketing suffers.

8.2. Tourism Employees as Determinants of Quality Service

The quality movement was quite slow to recognize the importance of
human factors in the successful implementation of quality systems. Early
emphasis was on production methods, measurement, and conformance
to specification (Wilkinson, 1992). Human factors are now accorded
greater attention, following the realization that teamwork, co-operation,
and motivation cannot be taken for granted. Japanese manufacturing
companies have always placed strong emphasis on human factors, and
have continuously emphasized that all employees have a responsibility
for quality (Ishikawa, 1976). Western authorities now follow suit: TQM
is concerned with moving the focus of control from outside the
individual to within: the objective being to make everyone accountable
for their own performance, and to get them committed to attaining
customers quality in a highly motivated fashion (Oakland, 1986).
experience as the Tourism services come about in the interaction between the service
basis for quality provider and the customer. The customers experience or perception of
perception the service encounter is the basis for quality perception. Research into

82
the factors leading to customer satisfaction and dissatisfaction show the
key role of the employees and their competence and service orientation.
Every time when a customer gets in touch with an element of the service
process, he or she judges the service producer. This means that service
providers must develop not only the precise form of the service, but also
the appropriate nature of interaction with customers. Most often, this
makes a new service far more complex, conceptually, than the develop
ment of a new tangible product.
Tourism may be classed as both a people-driven and people-served tourism:
economic activity. Given the fact that it is almost always the front-line people-driven and
service employee who carries the service encounter to its logical people-served
conclusion (either customer satisfaction or customer dissatisfaction) it is
paramount that tourism organizations of all types and sizes invest wisely
in terms of the recruitment, training and retention of such service
personnel. Existing as they do at the front line of the customer/supplier
interface, it is essential that all employees be at least equipped to do the
job in hand, thereby enabling them to meet visitor expectations during
each and every service encounter (ONeill, 1996).
The intangibility of a service product makes it difficult for customers employees
to imagine, understand and evaluate the offer. Consequently the beha behaviour as
viour of front line staff takes on additional importance as asurrogate for an evaluation
more traditional evaluation criteria. Frontline employees who play criterion
aboundary role represent the firm in interaction with outside parties
and, in addition, influence the cognitions, attitudes and evaluations
formed by customers.
These characteristics indicate the significant interactive qualities of interactive
services in service encounters, which means that services are most often qualities of
produced, distributed, and consumed in the interaction between the services
service provider and the service receiver (Grnroos, 2000). The
importance of service quality can be explained by the fact that it may be
seen as a phenomenon which contributes to the strength of interperso
nal, intra-organisational and inter-organisational service encounters.
Employees who make the discretionary effort who are friendly and employees
responsive, who ask the extra question or suggest the extra service, who discretionary
take the time to listen provide the competitive edge! (Donnelly et al., effort
1985). The question is, however, what can service firms do to ensure that
when moment of truth comes, frontline employees will engage in
creative discretionary behaviour? Some argue that a service firm can
motivate frontline employees to behave in a desired manner (Grnroos,
1985) that is, engage in creative discretionary behaviour through internal
marketing. In other words, internal marketing efforts can enhance
service quality delivery.

83
 service trinity Service employees are said to function as a service trinity (Crosby
and Stephens, 1987): they run the service operation, market the service
(part-time marketers), and are equated by customers with the service.
In tourism the guests first impression is generally considered to be of
the utmost importance. The impact that the receptionist has on
customer service can best be explained in terms of behaviours. Carlzon
moment of truth (1987) uses the term moment of truth to describe every point of
contact between the customer and front-office staff in a service
organization. He estimated that many thousands of moments of truth
occur each day and while they may be small in scale they are make-or-
break occasions when the organization has the opportunity to disappoint
the customer by failing to meet their expectations. He argues that the
key objective must be constantly to meet customer expectations and to
minimize occasions when customers are disappointed. People involved
in the provision of service need to be open to new and innovative ideas
if service delivery is to improve. This suggests that every company should
front-line seek to create an organizational environment which both supports
employees as quality and enhances communication between employees and customers.
avisit-card of The most important group are front-line employees who serve as a kind
an enterprise of companys visit-card.
In fact, service personnel are often incidental to the core service.
For instance it is the pilot who delivers an airlines core service, not the
air hostess, and the chef, not the waiter, is responsible for the quality of
the meal. The second of these assumptions is variously justified by the
fact that service delivery is simultaneous with consumption (Lewis and
Mitchell, 1990), incurs a great deal of interpersonal contact (Shostack,
1977).
indirect control In service situations managers do not have direct control over
employees during the service encounter. Indirect control is then
established by creating a climate conducive to optimal performance and
in which employees will behave in an appropriate manner. It seems to
be the preferred status; the reality, however, is much more akin to
amilitary battlefield with service excellence reported more as the
exception than the rule it should be. Whether it be a short tempered
coach driver, a grumpy air hostess, an under-slept hotel receptionist or
an over-stressed restaurant waiter, the multiplying effects of the
resultant bad word of mouth will continue to have negative spiralling
effects on both market share and bottom-line performance.
social behaviour The process of interpersonal interaction is likely to be affected by
as a quality factor forces within the individuals involved in the interaction. People can
behave socially in quite different ways depending on the situation they
find themselves in; in one situation a person may be dominant and

84
outgoing, but in another they may be shy and retiring. There are,
however, certain fundamental attributes which seem to persist from one
interaction to the other; these include a persons need for dominance or
dependence, their need for aggression or warmth in relationships, their
extroversion or introversion, stability or neuroticism, their perceptual
style, their social and cultural background and their self-image or self-
esteem. Three specific factors are worthy of mention (Garavan, 1997):
1. Perception of people. The selection of appropriate response from an
individuals range of behaviour is affected by the way they perceive
the other person in terms of their personality, age, status, gender,
etc.
2. Social competence. Just as some people are more skilled at manipula
tive motor skills, different levels of social skills can also be identified.
Likewise social skills can be improved through training and work
experience. The interaction between two socially competent people
will vary significantly from that between two socially less competent
people.
3. Motivations. An individual may be looking for support, protection
orguidance as in, for example, a tired guest at reception; any new
situation will tend to stimulate this dependent approach. Alter
natively, a person may be looking for warmth or friendship in the
relationship and may behave in such a way as to encourage a friendly
response. Another motivating force in social situations may be a need
for power or the desire to control other peoples behaviour; super
visors may have high needs in this respect. Another alternative need
may be a desire for approval, confirming what people think about
themselves in a favourable way, bolstering their self-image and self-
esteem.
There is the positive impact that social skills training can have on
improving the quality of customer service within a tourism company.
Especially the social-skills training of front-line employees may lead to
improved quality of service, in the short term at least. Training and
development can be used to reinforce certain behaviours and attitudes
which contribute to effective service while stressing the need for
improvement in behaviours which do not facilitate the attainment of
desired quality goals.

8.3. Barriers to Quality Enhancement in Tourism Service Encounters

A people focus, within tourism and hospitality, is by no means new
and successful organizations such as Disney, British Airways, Singapore
Airlines, Marriott and Ritz Carlton have developed strong reputations

85
 for their recognition of the role which their staff play in meeting
customer expectations within their sector (Baum et al., 1997). Best
practice, in the area, appears to recognize that quality service delivery
isnot the outcome of an isolated service enhancement training pro
gramme, but has to do with change in organizational culture from top
down and is a complex process which impacts on all areas of the
organization and its systems (Mahesh, 1994).
initial point The initial point of quality enhancement of service encounter is the
of quality recruitment of proper employees. The goal is not only to fill desks but
improvement also to find and hold onto workers who will continue to learn, to become
more productive, and to create trusting relationships with customers.
There are two main barriers to the recruitment and retention of quality
and well educated employees in tourism sector (even in most developed
countries):
the negative employment image of the sector employees
the rewards and benefits structure of the tourism and hospitality
industries.
negative The first barrier poor image is the result of a cocktail of historic
employment and contemporary factors the origin of hospitality work within
image domestic service and its consequent associations with servility; links, in
some countries, between hospitality employment and colonial legacy;
widespread use of expatriate labour in many developing countries,
creating the perception that the sector is one offering only limited
opportunity for promotion and progression; widespread exposure to
work in the sector as a first working experience, resulting in generalized
assessment based on limited exposure; and the reality of anti-social
working conditions and casualized remuneration (Baum et al., 1997).
Both industry employees and wider society view hotel and catering
labour as relatively low status, mainly because of the personal service
nature of the work involved (Wood, 1995). In some respects, the
negatively-held perceptions are not wholly justified by the reality of
work for major airlines, international hotel groups, theme parks or
within heritage organizations. In other regards, the perceptions are
amirror of the reality of work within an industrial sector dominated by
small and medium-sized enterprises (SMEs) and the impact of irregular
demand. The effect of these perceptions is to impose a barrier to
employment and employment choice among school and college leavers,
parents and career guidance teachers which has been very difficult to
counter. However, the situation, in some developing countries, is rather
different in that international tourism offers a high status and secure
employment environment when compared to alternatives in both the
primary and manufacturing sectors.

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 The second problem perceptions regarding working conditions, working
hours and pay extend across the tourism-related service sector (Choy, conditions in
1995). There is a clear and unavoidable reality, within tourism and tourism
hospitality, that the demand cycle is anti-social and falls out with
normal nine-to-five working parameters. Aircraft fly at night, hotel
guests expect services at weekends and theme parks reach peak demand
during public holidays. In terms of remuneration, the sector faces
challenges in common with other labour-intensive service areas and in
many countries has seen pressures for increased productivity along
sidedeskilling in many areas of work. At a policy level, the sector is
influenced greatly by legislative intervention, for example European
initiatives with respect to minimum wage levels, duration of the working
week and unsociable working times.
Staff turnover, therefore, can be very high, especially in tight and staff turnover
competitive labour markets, and is a major inhibitor for organizations
and destinations seeking to achieve overall enhancement of service and
product quality.
The combined impact of technology and product substitution in the
workplace; centralization of key management functions (finance,
information analysis, marketing); standardization of product and service
delivery; and delayering of management structures in many developed
tourism economies means that opportunities for meaningful and
developmental careers in skilled craft or managerial areas have been
reduced. Reduced opportunity, in turn, impacts on perceptions of the
sector and the likelihood of young people, in particular, opting for
tourism/hospitality as their career choice.
The already dismal lot of front-line service staff (low pay and long
working hours) was worsened by employers attitudes towards the
training function. In the absence of any worthwhile level of international
demand and/or five star benchmark competition, the prevailing attitude
was one of reluctance to invest in people who, when trained, would only reluctance to
take their newly acquired skills elsewhere. Employers, it seems, were invest in people
more concerned with the bottom line (at any cost) and extremely short-
sighted with respect to developing a well trained and competitive
quality human resource pool (ONeill, 1996). Central here was the
lackof professionalism in management and the lack of training and
development for new and existing employees. As a result tourism suffers
from the specific skills shortages in key technical and some managerial
areas. In part, this is an extension of the concerns addressed above
image, conditions, remuneration but is also linked to a reluctance,
within some industry sectors and businesses, to invest in the skills
development of their key personnel. In addition many small businesses

87
 (dominating in tourism sector) do not have the resources or skills to
focus on their human capital.
soft It results in some deficiencies related to soft competences (Baum,
competencies 1990) and technical abilities within the tourism sector. Soft competencies
include communication (with customers, colleagues and in various
languages other than the mother tongue), information (technology-
derived, but also analysis and interpretation) and service (marketing-
related, understanding customer needs). All those attributes are generic
to the sector and, indeed, to services in general.
technical abilities Technical ability deficiencies seem to be less significant as they can
readily be met within the workplace by larger employers, provided soft
competences are in place. However, the skills requirements of SMEs
remains an issue of rather less clear-cut endorsement.
managing the Tourism industry is also problematic in terms of managing the
moments of truth moments of truth (MOT) because of the fragmentation of the expe
riences of many customers/guests even within one enterprise (Baum,
1993). Guests come into contact with a wide range of staff attached to
different departments. Therefore customers may frequently encounter
rude, inefficient behaviour, in which case they may have a negative
MOT. MOT in effect became the inputs into perceived quality service.
Therefore to obtain a positive MOT the key issue is the management of
front-office staff behaviour. Hence, more training of employees
(especially some form of social skills training) and self-management
are necessary.
Consumer experience of human value added through service is
varied within and between the hospitality sectors of most countries. In
part, this is a reflection of the eclectic nature of customer expectations
which may demand very different things from the same service delivery
situation (Baum et al., 1997). It is also a factor of the number of human
interactions which most customers experience within any one hospitality
purchase these may or may not be within the one organization and
thus the ability to control the customers experience may not lie within
the organization, which suffers through lost business. In many respects,
a customers assessment of hospitality will be based on the total
destination experience.
service encounters The consumption of a tourism product consists of plenty of service
encounters, performed not only by the employees of several different
tourism enterprises (hotels, resorts, restaurants etc.) but also by local
people and workers of different service units not necessarily belonging
to the tourism sector. It is important to strive to ensure that the visitors
experience is positive throughout the full range of contact with the
providers of goods and services

88
 All the encounters involve feelings of anxiety and uncertainty about uncertainty about
service outcomes, as customers (tourists) feel they have no or little service outcomes
control. Tourists may sense this lack of control due to the varied nature
of service employees motivation and non-controllable service settings,
as well as due to varying embedded social support systems/groups. The
latter aspect plays a crucial role in the perception and judgement of
TDAs quality by customers.
Human resource management is more than a strategic and operatio human resource
nal concern for companies competing within the tourism and hospitality management
marketplace. It considers human resource management as a strategic as a strategic
dimension within the wider enhancement of quality and market posi dimension
tioning of tourism at the level of organizations, specific destinations,
regions within countries or whole nations. The main thesis advanced is
that the tourism and hospitality industry, from the perspective of all its
stakeholders (public sector, private sector, visitors and host community),
benefits from the close integration of human resource, labour market
and education policies, with those policies relating to, and impacting on,
the tourism and hospitality sector (Baum et al., 1997).

9. Quality Culture in a Tourism Enterprise

9.1. Understanding What Corporate Culture is

No two organisations or businesses are the same each has its own
culture that is as individual as a fingerprint! The organizational culture
usually includes values and beliefs that support the organisational goals.
It can be felt in the implicit rules and expectations of behaviour in an
organisation where, even though the rules which are not formally written
down, employees know what is expected of them. It is usually set by
management whose decisions on policy usually set up the culture of the
organisation. Things in an organisation which contribute to the culture
or climate include:
the organisational structure of reporting and relationships, corporate culture
company policy, contributors
personnel practices,
work flow and work loads,
job design,
management and supervisory styles.
Corporate culture is then a set of unwritten decrees, rituals, and definition of
apattern of shared values and norms which permeate an organization corporate culture
(Desphande and Webster, 1989). It provides the central theme under

89
 lying the growth of a firm (Smircich, 1983) and defines the way that
business is conducted (Barney, 1986). More importantly, cultural values
exert tremendous influence on the behaviour of employees and the
productivity of the organization (Pascale, 1983; Schneider 1980).
Corporate culture could affect a firms ability and approach, including
both technical and administrative procedures, to coping with the exter
nal environment and quality management activities (Webster, 1990).
main aspects of Culture in organizational terms is broadly the social/behavioural
an organizational manifestation and experiencing of multiple issues such as:
culture the way work is organized and experienced,
how authority exercised and distributed,
how people are and feel rewarded, organized and controlled,
the values and work orientation of staff,
the degree of formalization, standardization and control through
systems there is/should be,
the value placed on planning, analysis, logic, fairness etc.,
how much initiative, risk-taking, scope for individuality and expres
sion is given,
rules and expectations about such things as informality in inter
personal relations, dress, personal eccentricity etc.,
differential status,
emphasis given to rules, procedures, specifications of performance
and results, team or individual working.
strong and weak Strong Culture is said to exist where staff respond to stimulus because
corporate culture of their alignment to organizational values. Conversely, there is Weak
Culture where there is little alignment with organizational values and
control must be exercised through extensive procedures and bureau
cracy. The danger of bureaucratic organizations consists in missed
opportunities for innovation, through reliance on established proce
dures. On the contrary, innovative organizations need individuals
whoare prepared to challenge the status quo be it groupthink or
bureaucracy, and also need procedures to implement new ideas
effectively.
Johnson (1988) described a cultural web, identifying a number of
cultural web elements that can be used to describe organizational culture:
The Paradigm: What the organization is about; what it does; its
mission; its values.
Control Systems: The processes in place to monitor what is going on.
Role cultures would have vast rulebooks. There would be more
reliance on individualism in a power culture.
Organizational Structures: Reporting lines, hierarchies, and the way
that work flows through the business.

90
 Power Structures: Who makes the decisions, how widely spread is
power, and on what is power based?
Symbols: These include the logos and designs, but would extend to
symbols of power, such as car parking spaces and executive wash
rooms!
Rituals and Routines: Management meetings, board reports and so
on may become more habitual than necessary.
Stories and Myths: build up about people and events, and convey
amessage about what is valued within the organization.
These elements may overlap. Power structures may depend on
control systems, which may exploit the very rituals that generate
stories.
A vibrant and positive organizational work culture displays seven attributes
attributes (Ruin, 2001): of apositive
corporate culture
I. Transparent and sincere communication.
The essence of changing peoples attitude to quality is gaining
acceptance for the need for change. This can be achieved through good
communication. Its job is to ensure that each group (employees, custo
mers, business partners) sees TQM beneficial to them. Communication communication
is needed to clarify the future state in terms that are relevant and
concrete for organization participants at all levels (Abraham and Fisher,
1997). The creation of vision itself demands communication, some
timestwo-way communication throughout the whole organization, with
significant numbers of employees at all levels being involved in providing
feedback and input on early drafts of the vision.
Transparent or clear communication promotes peaceful and amicable
working environment, breeds creativity and expands productivity,
develops a learning company and its people are prepared to speak,
willing to listen and assimilate instructions, express frank opinions or
speak without fear or fervour, and every one is prepared to give chances
to each others opinions or ideas. Credible organizational work culture
ensures that policy in the company propagates honest, integral and
transparent communication both internally (among employees and
management) and externally (with customers, outsiders and the
public).

II. Customer focus.

It is vital then that employees working in an organization focus on customer focus
activities and jobs that satisfy, attract and retain good clientele base.
Good organizational work culture is customer-centred.

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 III. Cohesion.
clear common Positive organizational work-culture thrives if the companys mission
vision statement, corporate vision, business goals and operational objecti
vesare understood, shared, and supported by all employees. An all
encompassing and clear vision make easier comprehension by all
employees. Leadership provided by top management plays a paramount
role. It could, for example, explain clearly the companys mission and
vision. One of the fundamental elements for creating a positive
organizational work culture is employees understanding of what are to
be achieved, and the concerted effort of every one to achieve them.

IV. Teamwork.
collective effort Teamwork is an essential element for successful organizational work
culture. In teams we realise that together, everyone accomplishes
more. Teams form an essential component of organisations that could
greatly influence the total level of accomplishment. Teams or groups
could also fulfil the social desires of their members. It is fair then to say
that collective efforts in teams generate the potential to satisfy the needs
of individual employees, customers and organisation as a whole.

V. Can do mindset.
positive Employees with can do and positive disposition are an organisa
disposotion of tions powerful tool and invaluable asset. An employees positive
employees mindset entails positive perception towards self, his employer/company,
superiors and bosses, peers and colleagues and subordinates. Non-
negative attitudes create positive working atmosphere.

VI Adaptable to changes
change ever A company must run today if it wants to walk tomorrow along
constant side its competitors. This fast-paced corporate life is compounded by
the ever looming threat of change; so much so that the only constant
these days in managing business is change, that all else are variables.
An organisational work culture is superior and effective if it allows for
flexibility to changes and managing adequately the risks that changes
brings.

VII. Employability, not employment, for life

employability One of the conditions for todays corporate success is the fast
changing business environment, where employees learn the new rules of
work. The old rules were not always explicit, but employees knew that if
they performed a fairly decent job and avoided having problems, they
could have employment for life. The old rules were based on the

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assumption that a company would been around forever. Nowadays
employees need to prove their worth to their organisations pay.
According to the rules, each employee is to be a contributor and
contribute more than what s/he costs. It is not good for the employee or
for his company if he stays around for his entire career and contribute
nothing. A superior organisational work culture is one that allows
employees to realise that these days there is no employment, but
employability, for life. Lifetime jobs are disappearing from the corporate
culture in the global markets. Even the much admired Japanese
corporate work culture of lifetime employment is a bygone thing these
days.
More and more often companies see the only way to enhance their
competitiveness in changing corporate culture. People-related skills of
style and shared values plus strategy, structure and systems are very
powerful. It is not just management or just hourly operatives. It must be
everyone in the organization, across all disciplines and functions. It is by
harnessing the knowledge, experience and enthusiasm of everyone in
the organization that the most effective progress can be made.

9.2. Leadership for Quality

Management commitment is the single most important ingredient in any management
customer-based service strategy. Indeed, it could be said that the commitment
strength of any companies underlying service culture is only as strong as
its management commitment to that culture. However, great commit
ment of the chief executive is not enough. Leaders should understand
the service-profit

chain, be able to
develop and maintain a corporate
culture centred
around service to customers
and fellow employees. They
influence the quality of internal marketing through a willingness and
ability to listen, through they care about employees and deal of time
they spend on selecting, tracking, and recognizing the best employees
(Heskett et al., 1994).
The two keys to success in todays environment of increasing compe
tition and rapid change are an absolute passion for, and dedication to,
excellence in customer service and the effective and enlightened
management. The latter breeds commitment which leads to achieving
the desired standards in customer service. In the absence of good
management, employees will simply treat their work as a job a 8.00 to
16.00 routine without any burning desire to accomplish any more than
is necessary to remain employed.
Employee behaviour on the job is influenced directly positively or
negatively by managers. Positive influences are essential to strengt

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internal quality as hening employee commitment. What we call the internal quality of
a contributor to aworking environment contributes most to corporate culture and
corporate culture employee satisfaction. Internal quality is measured by the feelings that
employees have toward their jobs, colleagues, and companies. Internal
quality is also characterized by the attitudes that people have toward
one another, the way people serve each other inside the organization
and the their corporate commitment (Heskett et. al., 1994).
The majority of quality awards includes leadership as the main
criterion when assessing organization capability. Ulrich and Lake
(1991) state: First, capable organizations have a shared mindset both
inside and outside the organization. Second, they use management
practices to build a shared mindset. Third, they create a capacity for
change through understanding influence and managing organizational
systems. Finally, they empower all employees in an organization to think
and act as leaders.
Ways that managers can create and maintain the desired climate
comprise:
creating desired being a role model or example for the staff by actually behaving in
culture the way that s/he wants them to behave,
rewarding appropriate behaviour in some way. Managements
recognition of employees commitment to meet and exceed custo
mers needs, is demonstrated by regular incentives and rewards. This
congenial and mutually supportive working environment also enables
the company to enjoy a lower staff turnover (Kandampully and
Duddy, 1997),
employee empowerment (This enables employees not only to
recognize their individuality and unique contribution to the corporate
goal, but also allows them the flexibility and control to act and to
deliver a service tailored to their customers' specific needs.),
communicating to staff what behaviour is desired in as many ways as
possible,
providing training in order to highlight the activities that support the
sort of climate that the manager is trying to encourage.
Quality-oriented organizations require a modern view of leader
ship.The traditional view of leaders as special people who set the
direction, make key decisions and energize the troops as deriving from
adeeply individualistic and non-systemic worldview, is based on
assumptions of peoples powerlessness, their lack of personal vision and
inability to master the forces of change. The modern view is that
managers are facilitators, motivators and leaders. But getting the leader
position does not seem to be easy. A climate of fear will not do so.
Leaders require followers and to be a follower requires certain beliefs

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and attributes. Employees attitudes are not within the full control of
management.
In a quality-based management, leaders are responsible for building managers roles
organizations were people continually expand their capabilities to under
stand complexity, clarify vision, and improve shared mental models.
They are designers, stewards and teachers:
Leader as designer. The organizations policies, strategies and
systems are key area of design, but leadership goes beyond this. The
leaders task is integrating all the processes and designing the learning
processes whereby people throughout the organization can deal
productively with the critical issues.
Leader as steward. The notion of leader as steward is associated with
P.Block (1993). His starting point was that leader develops a unique
relationship to his or her own personal vision. He or she becomes
asteward of the vision. One of the important things to grasp here is that
stewardship involves a commitment to, and responsibility for the vision,
but it does not mean that the leader owns it. Leaders have to learn to
listen to other peoples vision and to change their own where necessary.
Leader as teacher. Leader as teacher is not about teaching
people how to achieve their vision.Much of the leverage leaders can
actually exert lies in helping people achieve more accurate, more
insightful and more empowering views of reality (Senge, 1990, p. 353).
Leader can influence peoples view of reality at four levels: events,
patterns of behaviour, systemic structures and the purpose story. Most
managers and leaders tend to focus on the first two of these levels but
are unable to develop systemic understanding.
A good manager focuses on teaching and learning instead of authority the concept of
and command. More and more often managers try to act as mentors mentoring
instead of supervisors. Traditionally, mentoring might have been
described as the activities conducted by a person (the mentor) for
another person (the mentee) in order to help that other person to do
ajob more effectively and/or to progress in their career. The mentor was
probably someone who had been there, done that before. A mentor
might use a variety of approaches, e.g., coaching, training, discussion,
counselling, etc. The mentor communicates his/her own vision and then
gets people to see their own behaviour. Protgs observe, question,
andexplore. Mentors demonstrate, explain and model. The following
assumptions form the foundation for a solid mentoring programme: mentoring
Deliberate learning is the cornerstone. The mentors job is to programme
promote intentional learning, which includes capacity building
through methods such as instructing, coaching, providing experiences,
modelling and advising.

95
 Both failure and success are powerful teachers. Mentors, as leaders
of a learning experience, certainly need to share their how to do
itso it comes out right stories. They also need to share their
experiences of failure, i.e., how Idid it wrong. Both types of stories
are powerful lessons that provide valuable opportunities for analyzing
individual and organizational realities.
Leader need to tell their stories. Personal scenarios, anecdotes and
case examples, because they offer valuable, often unforgettable
insight, must be shared. Mentors who can talk about themselves and
their experiences establish a rapport that makes them learning
leaders.
Development matures over time. Mentoring taps into continuous
learning that is not an event, or even a string of discrete events.
Rather, it is the synthesis of ongoing event, experiences, observation,
studies, and thoughtful analyses.
Mentoring is a joint venture. Successful mentoring means sharing
responsibility for learning. It begins with setting a contract for
learning around which the mentor, the protg, and their respective
line managers are aligned.
employees as boss People are boss watchers. Everyone consciously or unconsciously
watchers watches his or her immediate supervisor and senior manager. If
everyone at all levels in an organization visibly displays involvement and
commitment to policies, procedures and programmes then others
change their behaviour to support or mimic the values demonstrated by
their supervisor. If management begins meetings late, with no prepared
agenda then the rest of the organisation is likely to do the same (Miller,
1999). It is a passion for continuous improvement fired by well-thought-
out training and development plans that leaders ought to demonstrate,
not just talk about.

9.3. Establishing a Quality Culture

Achieving sustainable organisational change is extremely difficult and
many organisations fail to reach their goals at the operational level. This
failure usually occurs at the implementation stage because employees
and managers are too busy getting the job done, and dealing with day-
to-day problems. Effective implementation needs to change the way
work is done through the organisations operations, systems and
procedures; and this is linked to the organisations culture.
quality culture QM emphasizes the need to meet customer needs precisely, the
characteristics importance of doing things right from the start, and the importance of
recognizing that quality improvement will truly be achieved only when it

96
is a goal of all company employees and becomes part of the fabric and
culture of the entire organization. It means that quality awareness and
practices extend to all aspects of an organizations activities and are not
restricted (like quality control) to identifying and rejecting unacceptable
products or services. Quality improvement process typically includes
(Longenecker and Scazzero, 2000):
quality
defining quality;
improvement
developing quality standards;
process
measuring quality;
developing effective corrective-action procedures;
making changes to eliminate quality problems;
integrating all factors that affect quality.
All the systems and procedures are designed to meet not only the
needs of the organization, but also the needs of its customers, both
internal and external:
they must be customer-focused and customer driven, designed for
the convenience of the customer and staff alike throughout the
service chain;
they must be flexible enough to attend to individual customer needs
and permit swift and effective recovery from service failure;
they must constantly monitor external performance and be flexible
enough to take account of changing customer requirements;
they must support front-line staff in their role as customer-service
providers and not hinder their efforts through bureaucratic proce
dure;
they must constantly monitor internal performance and be flexible
enough to take account of additional recruitment, training and
development needs.
In a high-contact service business such as tourism service, marketers model for quality
must understand that commitment to quality service and service implementation
mentality are integral elements in the firm's culture and that a positive
attitude towards interpersonal relationships must be held by service
employees (Luk, 1997).
Tourism organisations must understand that their most important
resource is people. The culture of the organisation, if it is positive and
helpful can help to motivate staff or at least prevent them from
becoming dissatisfied. If the climate does not satisfy the needs of staff,
then it will probably become a demotivator that is that it would cause
dissatisfaction and so people would become less inclined to want to
work towards the organisational goals. The best approach to improving
the quality of service interactions is to develop service-minded service- minded
employees who firmly believe that they should do everything possible employees

97
 to keep the customer satisfied so that delivering high quality service to
customers becomes a natural way of life (Grnroos, 1990). Such a belief
is one of the manifestations of marketing culture.

Figure XVI: Model for Quality Implementation

Teams

Culture Commitment

Process

Customer/
Supplier

Systems Tools

Communication

Source: Letza and Gadd (1994).

operational Webster (1990, 1993) provides an operational definition of marketing

definition of culture in terms of six dimensions: service quality, organization, inter
marketing culture personal relationship, interpersonal communications, innovativeness,
and selling task. This operational definition allows the measurement of
a firms marketing culture, to discover its nature, and to identify linkages
with service performance.
tangible Only one of the above mentioned dimensions can be interpreted as
dimensions in the tangible dimension. In tourism it is composed of service facilities,
tourism hotel accommodation, good meals, information brochures and leaflets
describing the services available during the tour and places of visits,
aswell as helpful, polite and friendly tour escorts. The other ones are
intangible dimensions (responsiveness, assurance, reliability, empathy).
intangible The examples of such intangible dimensions in tourism sector may
dimensions in include the ability of tour escorts to deliver the service promptly,
tourism providing the service at the time as promised, willing to respond to tour
members requests, willingness to explain clearly the service benefits
andfeatures, experience and competence of employees, ability to
communicate, ability to organize and control all activities to meet the

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schedule, and ability to foster a friendly, harmonious relationship among
tour members or guests. Reliability in tourism should be understood as
the ability of tour escort to instil confidence in the tour members choice
of joining the tour, no sudden increase in tour cost, and a friendly tour
characterized by good relationships among tour members. Empathy
refers to personal attention to individual tourist and employees ability
to understand the specific needs of each customer.
The interpersonal relationship dimension includes attention to interpersonal
employees feelings, recognition of employees as invaluable assets to relationship
thefirm, adoption of an open-door policy within the organization, dimension
frequent interactions between management and front-line employees,
and encouragement to express opinions to higher management. They
also nurture close work relations between subordinates and supervisors
which may be mirrored in employees relationships with their customers
(Luk, 1997).
Everyone in the organization must be equipped to cope with the total quality
demands of quality and excellence. In order to make this commitment dimensions
employees must be aware of the concepts of total quality:
approach: management-led.
scope: company-wide, customer-driven.
philosophy: prevention rather than cure.
standard: right-the-first-time.
measure: short-term cost, long-term gain.
scale: total quality or no quality.
time: continuous improvement.
The key lesson is that management can only offer environments
which are conducive to employees wanting to alter their values, beliefs
and behaviours towards providing a quality service. They need, there
fore, to believe and buy in to cultural change programmes. Mana
gement, of course, merely has to find out how to create the environment how to create
in which its proposals and changes are seen as fitting in with the values, a quality
beliefs and behaviours of the workforce. Among many tools of mana environment
gement influencing corporate culture and the quality of service en
counter there are 4 deserving special attention:
training,
motivating,
employees participation (partnering for competitiveness),
empowerment.
Institutions such as banks, tourism agencies, hotels, airlines or
hospitals do not produce tangible goods and the interaction between
workers and customers is much more critical in organizations of this
kind. As a result, the skills, attitudes, and training of service personnel training

99
 essentially affect the quality of services delivered. Even if the quality of
the design is correct in a company, the result in practice may be different
from what is intended. Service is difficult to standardise, since it is often
dependent on the personal interaction between the front-line employer
and the customer. Different actions are needed, e.g. training the
employee who is responsible for the implementation of the service
concept. In tourism the importance of the development of service
employees interpersonal skills as well as effective problem solving-
conflict resolution skills, is evident. This will prevent the employee from
entering the cyclical process of poor customer relationships and
subsequent poor leader relationships. It is critical to understand the
determinants of a successful relationship between an employee and
acustomer in order to develop appropriate training programs which
emphasize the skills needed to insure personal and firms success. The
company has incorporated some techniques into initial and ongoing
training to improve employee/customer relationships. These techniques
allow the service employee to develop successful behavioural scripts and
identify matching situations.
effective training Effective training methods and techniques are difficult to develop
methods (Charles, 1997, Cooper and Shepherd, 1997, Periic, 1996). Most training
programs are organizational socialization programs geared toward
aparticular corporate culture and management style. Such organizations
are only interested in the employees being able to use the methods and
techniques developed by the corporation to approach their business
objectives. The focus is my way or no way. This type of organizational
approach does not use a research base to train employees. Training in
the case of organizational socialization is familiarizing the employee
with the corporate procedures and culture. Employees in this type of
organization are only pawns and the management does the thinking.
It is important to recognize that when approaches like TQM are used
(see Chapter 10), the burden and the innovation shift from upper
management to the employees. The employees are empowered to find
solutions to problems and improve the ways of doing business. The
responsibility is not upon management. It is managements role to
facilitate the employees to become actively involved with their jobs to be
part of the solution and not the problem.
Employees are to be taught to think systematically, to be able to
identify problems and actively design solutions that are in the best
interest of the individual and organization. It is the focus of this
particular type of training program that is being advocated to teach
critical thinking skills and make the employees partners in the strategic
planning process (Anderson et al., 2001).

100
 Training employees should cover both: service standards and problem
solving as service encounters frequently contain elements that cannot be
standardised. Employees can be then given more autonomy in decision
making and in undertaking actions in service encounters.
The biggest cost of quality is the money spent chasing new prescrip knowledge
tions, usually provided by expensive consultants. If we all keep learning, management
and, for instance, allow all our employees time for e-learning, reading
journals and business magazines as part of their daily routine, we should
not need massive training schemes. For those who are reluctant to read,
there are plenty of lively, informative videos. But the idea of self-
learning, coaching, mentoring and sharing the knowledge within the
organization does not come just from the attempt to lower the costs of
training. It has been developed into the much wider concept of learning
organizations and needs some special approach called knowledge
management. The necessity of knowledge management comes from
P.Senge (1990, p. 139) observation: Organizations learn only through
individuals who learn. Individual learning does not guarantee organiza
tional learning. But without it no organizational learning occurs.
Aspects of management such as motivation are critical in service motivation
sector. Motivating for quality may take different forms of direct moti
vation (of material and immaterial character) and the incentives which
are very popular especially within tourism sector (e.g. bonus trips). What
is worth mentioning is that people can be motivated through:
1 identifying and surfacing dissatisfaction with the current state;
2 building in participation in the change;
3 building in rewards for the behaviour that is desired both during the
transition state and in the future state;
4 providing people with the time and opportunity to disengage from
the present state.
Motivated staff require the provision of: an appropriate and clear
career ladder and opportunities; remuneration and recognition system;
a measurement system; and appraisal procedures.
As it was already mentioned successful large-scale change requires
visible and active leadership. But leadership is not enough principle.
Even the magic leader cannot by itself, sustain large-scale change.
Success depends on building a broader base of support with other
individuals who first act as followers then as helpers and finally as
coowners of the change. The way to achieve this is through inviting co-owners of the
participation and involvement in order to develop leadership through change
out the organization (Nadler, 1989). Employees should to be involved in
preventing and correcting problems. They must be allowed to use and
release their energy in support of the business objectives.

101
 the idea of Partnering can be seen also in a wider sense as companys partnership
partnering with customers and suppliers (similarly like the idea of loyalty-based
management). The customers (internal and external) as well as suppliers
must be listened to and be part of the improvement cycle. People must
play a critical role in any performance improvement initiative.
The idea of partnering is well practiced in manufacture industry
through so called quality circles and team work. But the experiences of
teamwork seems to be more difficult, to apply to the tourism and
especially hospitality context. Part of the problem may be the traditio
nalnature of hospitality management and its attendant functional
departmental structure which can contribute to inertia, conflict and
lacklustre performance. Another difficulty arises in matching a generic
team strategy to hospitality units of diverse sizes, cultures and product
offering, many of whom are struggling with the challenge of brand
identity. One hospitality firm who has consistently tried to reconcile the
opposing tensions of standardization and empowerment is the Accor
Group of France. From earlier experiments with quality circles, their
Novotel chain of three-star hotels has developed a new approach to
developing staff and ensuring standard brand quality. Flexible working
patterns have broken down the staff demarcation normal within
hotelsand has enabled the creation of an open space approach to
organizational learning Segal-Horn, 1995). Firmly at the helm of this
initiative is the unit general manager, whose role has been redefined
much closer to the social role of a ships captain. As a result, greater
collaboration between levels is observed and an increased autonomy
which has added value for staff and customers alike (Ingram, 1997).
internally directed High performance service companies are using internal marketing ideas
service vision to develop an internally directed service vision. The health of the
enterprise is dependent on the degree in which employees share
common values, and how well employees are served by the companys
activities.
Last but not least comes the point of employees empowerment. The
idea seems multidimensional and especially important within the
practice of service organization that is why it is presented in a separate
chapter.

9.4. The Power of Empowerment

The presence of the customer in the service process, and the difficulty of
establishing precise specifications, account for uncertainty and variability
variation and in high contact services. This appears, at first sight, to be contrary to
variability afundamental quality improvement objective control of variation.

102
Careful distinction between variety and variability, however, explains
the apparent contradiction. Variety can be defined as the extent of the
range of service provided. This will be large in most services because
they have to be adapted to match individual customers needs. This is
not the same as variability which is more generally used to describe
differences occurring in successive performances of services intended to
be the same.
Clearly, variety is the inevitable consequence of the multiplicity of
inputs and outputs associated with high contact and high interaction the difficulty
services, and is desirable for customer satisfaction. Variability, on the in reducing
other hand, is not desirable, and may not be inevitable. The difficulty in variability
reducing variability in services increases with the difficulty of making
valid specifications, and are exacerbated by the problems of measure
ment and control of an apparently infinite variety of services.
Attempting to achieve consistent service quality by relying on more ineffectiveness of
supervision has proved ineffective. Excessive regulation of service supervision
employees and elaborate chains of command bring inertia and de
humanization of services. A more successful approach is to restructure
incentives, to emphasize quality, to redesign jobs fostering teamwork,
and to instil a sense of pride (Heskett, 1986).
The quality of service delivery rests to a large degree on the way in
which the provider consumer interaction (i.e. service encounter)
proceeds and, consequently, it is unpredictable a priori (Singh, 1991).
Consumers utilise the quality of the provider-consumer interaction itself
as the basis for evaluating the service received. That is why service
design must differ from goods design in one essential aspect: it must
include a certain amount of discretion and it must empower employees
to use their best judgement in interaction with customers (Gummesson,
1995).
Here comes empowerment a fashionable research area in the field
of services marketing. Empowerment refers to a process whereby an definition of
individuals belief in his or her self-efficacy is enhanced. To empower empowerment
means either to strengthen this belief or to weaken ones belief
inpersonal powerlessness (Conger and Kanungo, 1998). Employee
empowerment is also the process of decentralizing decision making in
an organization, whereby managers give more discretion and autonomy
to the front-line employees (Johnson, 1994).
Staff empowerment means transferring power and responsibility to
employees so that, within specified limits, they will be better able to
provide the best possible service at their own discretion (Kinlaw, 1993).
The purpose of shifting decision making to the employees is not to interior and
remove managers totally from making decisions, or to turn the operation exterior people

103
 into a democracy. Indeed, it is managements new role to guide, assist
and support the employees in achieving success through this self-
directed leadership strategy (Brymer, 1991). Managers are interior
people. They see life well within their control. They realize the relation
ship between behaviour and performance and therefore take personal
responsibility for their departments and organizations performance
(Johnson, 1994).
Exterior people, on the other hand, are employees who see life as
outside their personal control. Because exteriors do not recognize
acause-and-effect relationship between behaviour and success, they
arenot easily motivated to change the way they behave. Exteriors learn
little from their mistakes because they believe they had little personally
to do with the mistakes; they just happened. Their excuses run from,
Nobody told me, to Its not my fault, to finally, You didnt tell me
to do that (Conrath, 1988). Two of the principal causes of poor service
quality are placing the wrong people in the service role and giving
employees too little control over the service.
personal Managers empower their employees by insisting they take personal
responsibility responsibility for their successes, as well as their mistakes. In addition,
for failures and assigning tasks for which employees are qualified creates an environment
successes which fosters success. Managers also need to help disempowered
employees understand that success is a combination of chance, choice,
and achievement; this is brought about by emphasizing behaviour over
attitude. Finally, treating employees as adults by creating a truly co-
operative relationship is part of a dynamic employment relationship
(Atchison, 1991). This is also the problem of companys security
employees are to be able to work and act even in the absence of
managers.

Figure XVII: Benefits of Empowered Employees

Benefis of having self-directed

and empowered employees

More Managers
Less Better
flexible, have more
risk rapport with
innovative, time for
aversive employees
creative other tasks

Source: Johnson (1994).

104
 There are many benefits to having self-directed and empowered benefits of
employees. First, empowered employees are less risk aversive and are empowerment
more willing to suggest bolder solutions. Second, when empowered
employees are given more authority, autonomy and flexibility, they will
be encouraged to be more innovative and creative. Third, under an
empowerment programme, managers and employees work together as
ateam, more in an adult-to-adult relationship and less in an adult-to-
child relationship. And finally, as employees take on greater respon
sibility, managers will have more time to handle other tasks they are
responsible for (Johnson, 1994).
In particular, empowerment is regarded as a strategic advantage in
situations of service failures: empowered contact employees can provide
the complaining customers with adequate and fast service recovery than
non-empowered counterparts. Customers who, in a critical situation,
meet an empowered employee will normally regard this as a part of
excellent service. Empowered employees can, on their own initiative,
raise the level of quality. Thus, in service organisations, staff empower
ment can be regarded as a crucial ingredient in quality improvements.
Discretionary behaviour (behaviours not specified formally but viewed dicretion as
positively by the firm such as travelling the extra mile for the custo quality factor
mer) will determine how frontline employees behave as part-time
marketers and can have a significant impact on customer satisfaction
and favourable service quality perceptions. Sparrow and Wood (1994)
advance the proposition that experienced food servers have a far richer
picture of customers than do training manuals and that their perceptual
maps can assist in providing quality service. Further, such techniques
produce enhanced feelings of trust and self-worth in employees as well
as reducing absenteeism and waste (Ingram, 1997).
An additional argument for empowerment in tourism sector is the
fact that contact employees have to deal with a great variety of
customers coming from various cultural horizons. Contact employees diadvantages of
have to adapt their behaviour to a number of different cultures and have disempowered
to undergo tremendous pressure to adapt their behaviour to specific employees
individual customers. An empowered environment allows people to
move out of their role stereotypes so that all people can take initiative,
assume power, act tenderly and compassionately, and use intuition
tobalance their rationality. It makes them feel better and improves
perceived quality of their working environment. On the contrary
disempowered employees are usually passive and have retreated deep
within themselves, focusing on long-lost dreams and missed oppor
tunities. People become unmotivated by the thoughtless, irritating,
unconcerned way they are treated. And, of course, unmotivated people

105
 are unlikely to produce quality results (Hoernschmeyer, 1989). Disem
powered employees recognize that they have limited power and
influence, and that the little they have is always in danger of being taken
away if they are not careful. In addition, disempowered employees may
resist empowerment. They feel safer in the old culture where they had
lower levels of responsibility and accountability (Fleming, 1991).

Figure XVIII: How Management Can Empower Employees

Motivation

Support Feedback

Allow How
risk to Spend
taking empower time

Stress Relinquish
innovation control
Encourage
decision
making

Source: Johnson (1994).

elements of Empowerment means giving people the power to do the job

empowerment demanded by their positions. People and positions are empowered by
three ingredients: information, support, and resources. At the same time
they become responsible for their use. Another ingredient to empower
ment and self-directed leadership is having your heart invested in the
organization. This is called psychological ownership. Psychological
ownership is when everyone inside a business feels a sense of res
ponsibility for what is being done and holds himself or herself duly
accountable for delivering on an organizations pledges. To build
psychological ownership, an employee must find meaning in his/her daily
tasks, feel a sense of security, and possess an attitude that work can be
fun (Brown, 1989).

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 Main barriers to empowerment are (Kahnweiler, 1991): barriers to
resistance from supervisors who are reluctant to allow their staff empowerment
more autonomy (in empowering employees they experience a loss of
power),
resistance from employees (it is easier and safer to follow instruc
tions). If managers make all the decisions, employees are not to
blame when things go wrong;
more active participation can mean bigger work loads.
Additionally, managers are often confused about how to mobilize
and motivate this newly empowered staff. Managers will be forced to
delegate more responsibility to lower levels; this delegation is yet
another blow to hierarchical authority. Finally, when employees are
given greater responsibility, they become bolder about speaking up, they
challenge authority, and they begin to create their own destiny (Kanter,
1989). Thus empowerment needs well educated and experienced
managers.

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 PART THREE: QUALITY MANAGEMENT
SYSTEMS

10. Introduction to TQM Philosophy

10.1. Evolution of Quality Management

quality Quality management. This is a generic term which describes a distingui
management shable tool or method used for quality improvement. Various quality
evolution management concepts started to develop in the previous century with
the first era of inspection (Figure XIX). Over the years, quality manage
ment theory has evolved into the concept of quality control, then quality
assurance to reach the highest level of total quality management
(TQM). Various tools and techniques are associated with each of these
four levels. The authors emphasise that the highest level in the evolution
of quality management the level of TQM comprises the achievements
of all previous stages in the development of quality management theory.
This signifies, that the philosophy of TQM utilises the tools and
techniques developed by preceding authors of quality management
theories.

Figure XIX: The four levels in the evolution of quality management

Source: Kachniewska (2005).

TQM philosophy The philosophy of TQM was introduced by Feigenbaum as early as

1951 by the name total quality control (TQC). The definition of quality

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given by Feigenbaum (1991) is the total composite product and service
characteristics of marketing, engineering, manufacture, and maintenance
through which the product and service in use will meet the expectations of the
customer.
Juran brought the idea of TQC to Japan in the early 1950s. The
principles of TQC were quickly adopted in Japan, where it was further
developed and called company wide quality control (CWQC). The
developments in the management of quality during the 1980s led
increasingly to the international adoption of the principle of business
improvement through TQM. With the maturing of the approaches to
TQM in the 1990s, organizations have sought to refine their TQM
methodologies and in particular to identify those quality activities which
most directly affect business performance (Ollila and Malmipuro,
1999).
Before we start analyzing the tools of TQM lets start with an
explanation of the previous quality approaches.
Inspection included just salvage sorting, grading, corrective actions, inspection
identification of sources of non-conformance.
Quality control refers to those processes of verification and will quality control
include systematic monitoring, including statistical and other manage
ment information, recurring and one-off audits and inspection activity
designed to establish whether standards are being achieved (HMSO,
1991). Quality control is one aspect of quality assurance. It should
provide objective feedback to line managers who have continuing
responsibility for quality, about what is actually being achieved. The
major tools in that approach include basic quality planning, manual
process performance, data self-inspection, product testing, use of basic
statistics and paperwork control.
Quality assurance is the implementation of processes which aim to quality assurance
ensure that concern for quality is designed and built into product/
services. It implies commitment by the organization to a systematic
approach to the pursuit of quality, demonstrated by an explicit state
ment of policy, setting out expectations and standards. Systematic and
comprehensive arrangements to ensure that the required standards are
achieved will be evident throughout organizational procedures and will
include processes for verification and feedback.

10.2. The Total Quality Approach to Quality Management

All the approaches mentioned in chapter 10.1, seem to be very static.
The organization which believes that the traditional quality control
techniques, and the way they have always been used, will resolve their

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 quality problems is wrong. Employing more inspectors, tightening up
standards, developing correction, repair and rework teams do not
promote quality. Traditionally, quality has been regarded as the respon
sibility of the Quality Control department, and still it has not yet been
recognized in some organizations that many quality problems originate
in the service or administrative areas.
On the contrary the concept of TQM is very dynamic and goes one
total quality step further then previous methods. This approach was intended to
approach move away from the traditional role of chasing failure, towards an
attitude of prevention and for every individual to be responsible for
producing good quality products and services. It goes towards conti
nuous improvement and assumes that it is not sufficient to inspect,
control or assure quality in order to achieve customer satisfaction.
TQMrequires the application of quality management principles to all
operations, every branch and at every level of the organization. Every
one should be committed to continuous improvement in their part of
the operation. Through this participation and commitment, with the use
of various tools and techniques that the TQM concept has adopted or
developed, quality can be managed effectively.
Table VIII contains some of multiple definitions of TQM.

Table VIII: Definitions of TQM

TQM mans that the organizations culture is defined by and supports the
constant attainment of customer satisfaction through an integrated system of
tools, techniques and training. This involves the continuous improvement of
organizational processes, resulting in high quality products and techniques
(Sashkin and Kiser, 1993, p. 39).
TQM management approach of an organisation, centred on quality, based on
the participation of all its members and aiming at long-term success through
customer satisfaction, as well benefits for all members of the organisation and
for society (Zink, 1998, p. 38).
TQM is the integration of all functions and processes within an organization in
order to achieve continuous improvement of the quality of goods. The goal is
customer satisfaction (Ross, 1999, p. 1).
TQM is a systems approach to management that aims to continuously increase
value to customers by designing and continuously improving organizational
processes and systems (Stahl, 1995, p.4).

Source: adapted from Lakhe and Mohanty (1995).

TQM describes an approach to quality assurance which stresses the

importance of creating a culture in which concern for quality is an
integral part of product/service delivery. TQM is not just a management
technique. This is a kind of philosophy which stresses systematic,

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integrated, consistent, organization-wide perspective involving everyone
and everything. The key elements of the philosophy are the prevention
of defects and an emphasis on quality in design.
TQM is an organized system of strategies, methods, tools and definition of TQM
behaviours that enable organizational leaders to: identify and prioritize
customers needs and expectations; design and improve business proces
ses that meet these needs; and to achieve breakthrough improvements
that create exciting quality for customers and stakeholders. The three
letters of the acronym stand for (Witcher, 1990):
Total: Every person in the firm is involved (also its customers the acronym of
and suppliers). TQM
Quality: Consistent gearing of all activities to the quality
requirements of internal and external customers/guests:
principle of guest-led action
Management: Senior executives are fully committed: principle of
management responsibility.
TQM is concerned with moving the focus of control from outside the
individual to within; the objectives being to make everyone accountable
for their own performance, and to get them committed to attaining
quality in a highly motivated fashion. The assumption a director or
manager must make in order to move in this direction are simply that
people do not need to be coerced to perform well, and that people want
to achieve, accomplish, influence activity, and challenge their abilities.
Real commitment generates a vision which is meaningful and achievable.
The vision and mission for the organization must be translated into
effective plans for implementation. This means identifying the critical
success factors and key processes.
TQM is an integrative management concept for continuously quality as
improving the quality of goods and services delivered through the everyones
participation of all levels and functions of the organization. Growing responsibility
outof human resource management (HRM) are structures for employee
involvement and team approaches to decision making, quality improv
ement, and problem solving.
The total quality system is the interrelated set of plans, policies,
processes, procedures, people and technology required to meet the
objectives. It is composed of two related systems the management
system and the technical system (Figure XX).
There are a number of instances of TQM being applied in the service
sector, and to the service functions of manufacturing concerns. Many of
these applications concentrate on tangible functions within service
operations, and particularly on back office activities. There is persuasive
argument in the literature, however, for the less tangible elements of

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 Figure XX: The Total Quality System Model

112
TOTAL QUALITY
SYSTEM

ECOOMIC CONCIDERATIONS
MANAGEMENT TECHNICAL
SYSTEM SYSTEM

PLANNING QUALITY OF QUALITY OF

PROCESS DESIGN AND CONFORMANCE
PERFORMANCE PROCESS
PROCESS
PLANNING CONTROLLING
PROCESS PROCESS

STATISTICAL
HUMAN PRODUCT AND PROCESS
RESOURCES PROCESS CONTROL
MANAGEMENT DESIGN TECHNIQUES
PROCESS STRUCTURE

SAMPLING
INSPECTION AND TECHNIQUES
EMPLOEE EMPLOEE MEASUREMENT
QUALITY
INVOLVEMENT INVOLVEMENT STRUCTURE
IMPROVEMENT
AND/OR -
AND PROBLEM AND/OR
TEAM TEAM
SOLVING
STRUCTURE STRUCTURE
STRUCTURE

Source: Evans and Lindsay (1993).

service and employee-customer interaction being particularly important
determinants of service quality.
Attempts to improve quality of service, therefore, often concentrate
on educating, training and motivating staff. Quality improvement by
means of customer care initiatives have also been applied in service.
Such approaches avoid some of the more difficult issues associated
withmeasurement and control of inherently variable service delivery.
A undamental tenet of TQM is that action should be centred on making
the processes capable of producing the required output, that is attention
to the process not just to the product. Clearly this should apply to
services just as much as it does to goods which are produced.

10.3. Basic Principles of TQM

Successful implementation of strategic quality management is not
aneasy task. As Deming stated, Everyone doing his best is not the
answer. It is necessary that people know what to do. Drastic changes
arerequired. The responsibility for changes rests on management
(Deming, 1982). In fact, the major emphasis of Demings philosophy on
quality management is that top management must orient themselves to
innovate and commit resources constantly to support innovation and
continuous improvement (Deming, 1986). Building quality into products
and services, breaking down department and worker-supervisor barriers,
developing long-term partnerships with suppliers, restoring pride of
workmanship, ceasing dependence on mass inspection, and removing
numerical quotas and targets and concentrating instead on improving
processes are the leadership issues that management must pursue in
developing strategies for managing quality.
Evans and Lindsay (1993) formed several key concepts for successful TQM
implementation of TQM: implementation
1. Long-term perspective. Improvements do not happen overnight. The process
planning and organizing of improvement activities take time and
require major commitments from everybody in the organization.
While time is necessary, it can work against the organization. First,
the longer an organization takes to implement TQM, the further
ahead its competitors will be. Second, unless steps are taken to
ensure that TQM remains a priority, the organization risks losing
the commitment of its employees.
2. Customer focus. Customer service is becoming an important differen
tiator in an increasingly competitive business An essential attribute
of TQM is the understanding that the customer is the final arbiter of
quality. TQM is based on the premise that quality is driven by and

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 defined by the customer. Product and service attributes that create
aperception of quality will increase customer satisfaction and
demand. Various means, such as customer opinion surveys and focus
groups, are used to understand customer requirements and values.
New techniques must be adopted to obtain customer feedback.
Afirm must also recognize that internal customers the next person
or department in manufacturing process or the order-picker who
receives instructions from an order entry clerk are as important in
assuring quality as are external customers who purchase the product.
Employees must view themselves as both customers of and suppliers
to other employees. The process can help to identify and eliminate
many useless activities.
3. Top management focus. If commitment to quality is not a priority,
any initiative is doomed to failure. The management should set
quality policy and review performance goals within the company.
Quality should be a major factor in strategic planning. Many of the
management principles and practices that are required in a TQM
environment may be contrary to a companys long-standing prac
tices. However, it is not enough that management simply throw
money at quality, it also needs to ensure that the processes of
quality are working in an everyday sense and at the sharp end of the
business where customers are affected (Knights and McCabe,
1996).
4. Total involvement. All functions at all levels of an organization must
focus on continuous improvement to achieve corporate goals.
5. Systems thinking and error prevention. Traditionally, organizations
are integrated vertically by linking all the levels of management
inahierarchical fashion. TQM requires horizontal coordination
between organizational units. A process focus, by which inputs are
transformed into outputs, provides better insights into how the
organization actually operates.
6. Training and education. Continuous learning, training, and educa
tion is the responsibility of everyone in the organization. Every
employee requires training in TQM philosophies and techniques.
This is evident in the above-mentioned philosophies of Deming,
Juran and Crosby. Training is necessary to reach a common under
standing of goals and objectives and the means to attain them.
Training usually begins with awareness in quality management
principles and is followed by particular skills in the quality improve
ment. Training must be viewed as a continuous effort, not a one-time
project. This requires the commitment of significant resources but
many firms are still reluctant to make this move.

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7. Continuous improvement. Statistical reasoning with factual data
isthe basis for problem solving an continuous improvement. The
very purpose of this principle is to improve continuously to attain
excellence.
8. Participation and teamwork. Problem solving and process
improvement are best performed by multifunctional work teams.
Everyone must participate in the improvement efforts. The person
in any organization that best understands their job and how it can be
improved is the one performing it. Employees must be empowered
to make decisions that affect quality and develop and implement
new, better systems. This often represents a profound shift in
thephilosophy of senior management, because the traditional
philosophy is that the work force should be managed to conform
toexisting business systems. Participation can be encouraged by
recognizing team and individual accomplishments, sharing success
stories throughout the organization, encouraging risk-taking by
removing the fear of failure, encouraging the formation of employee
involvement teams, implementing suggestion systems that act
rapidly, provide feedback and reward implemented suggestions and
providing financial and technical support to employees, to develop
their ideas.
9. Measurement and reporting systems. Measures based on facts
mustbe established to assess quality improvement. Reporting of
information must be timely and accurate and a systematic process to
measure and evaluate quality continuously is necessary. Traditional
information systems focus on cost and financial accounting, sales,
marketing, purchasing and scheduling. Quality measures must
become part of the reports that are regularly provided to middle and
upper management. Line workers and supervisors also require
quality reports so that problems can be identified, analyzed and
solved.
10. Communication and strong leadership. TQM requires improved
communications to support improvement. Traditional lines of
communication are slow and sometimes inaccurate. People need
tocommunicate across organizational levels, functions, product
lines, and locations to solve problems and implement changes. Top
managers must become the organizations TQM leaders. They must
be the focal point that provides broad perspectives and vision,
encouragement and recognition. The leader must be determined to
establish TQM initiatives and committed to sustaining its activities
through daily actions. This is necessary to overcome the inevitable
resistance to change.

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 Figure XXI: The quality development wheel

Quality standard

Quality
development

Correction Planning

Implemen-
Review tation

Quality
assurance

Time

Source: Koch (2004).

principles TQM also involves the principle of process orientation, thus

of process emphasizing that each product or service is the result of a process, with
orientation each step being linked to the one before and after it. The quality of the
individual processes makes for the quality of the whole, and in time,
quality standards are raised by means of the permanent cycle of planning
implementation reviewing correction.

10.4. TQM Implementation Process benefits and pitfalls

TQM versus Table IX contains the comparison between two organizations: in the
non-TQM firstone, TQM has not been implemented so far, whereas the second
organizations organization has been using it successfully.
TQM may provide a fundamental way of conducting business,
making the organization more competitive and viable, with TQM driving
change and improvement. In TQM-organizations such benefits as enhan
ced profitability, reduced costs, creating an innovative approach,
accountability and a more enjoyable working environment are bound to
appear. There is also a better organizational synergy, removal of non-
productive activities, better competitor understanding through bench
marking and a more reliable communication system.
Every enterprise should find its own way to TQM. Many organiza
tions have found it difficult to implement an effective TQM policy. One
of the prime reasons for this is that organizations fail to identify what

116
they are attempting to change and achieve by implementing TQM. If
these factors are not addressed then the necessary resources and
commitment required to develop an effective tailored approach may be
lacking. In view of its complexity, the TQM process has to be well
planned and professionally designed. In many cases, there is a need for
employing a consultant to guide the whole process in order to avoid the
development of impractical or over-elaborated processes. It is worth
pointing out, however, that the concept of TQM should not be treated
as a ready-made set of principles and tools to be used technically as
afast solution to gaining competitive advantage. TQM requires several
years of sustained effort to change the culture of the system (Castle,
1996).

Table IX: NON-TQM organisation and TQM organization

NON-TQM organization TQM organization

Company structure strong vertically but Company structure strong both verti
weak horizontally poor communica cally and horizontally.
tions between departments.
Emphasis on inspecting quality into Emphasis on designing quality into
products and services. products and services.
Quality is the business of the Production Quality is everyones business.
and Quality departments
High Quality = High Cost. High Quality = Low Cost.
Goalpost mentality all products within Nominal value is best, more consistent
specification limits are equally good, products
which increases piece to piece variability
and reduces consistency.
Lack of methods for the routine optimi Well used methods, leading to more
sation of products and processes. robust and reliable processes and
products.
Technology fixes tighter tolerances, Invest last, not first only if optimi
better materials, higher skills etc to sation of product and process fails to
improve quality but at a higher cost. give required quality.
Voice of the manager is dominant. Voice of the customer is dominant.

Source: http://www.kbe.cov.ac.uk/emdata/48tqm.html

Organizations should undertake a thorough analysis of the most

common factors affecting the successful implementation of TQM.
Theinformation from such an analysis should assist in determining
which implementation approach to use and how quickly it should be
implemented.

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TQM internal and TQM implicates the increase of efficiency which results in short
external profits terms of achieving goals, shorter time involved, lower involvement of
materials, energy and materials. It brings in particular internal and
external profits (table X).

Table X: Internal and external profits of TQM implementation

Internal profits of TQM External profits of TQM

implementation
better involvement of workers
efficient management and planning
better flow of information
a guarantee of quality
lower number of complains
clear responsibilities
lower costs
less mistakes
more efficient processes
better use of assets
high level of satisfaction among
workers
trust to own actions
implementation
higher market share
presence on national and
international markets
higher profits
higher quality of product
better service
better control of processes
trust to company
higher sensitivity for clients and
market
a tool in marketing
trust and limited control of
service
easier contacts with banks
better contacts with insurance
companies
constant relationships with clients
limited loss of clients
high level of client loyalty
easier gaining new partners
increase in reliability (certificates)
identification of strong and weak
points in a company and
eliminating mistakes
better trade mark, recognizable
limited additional cost, finance
management
proud workers of being employed
in such company

Source: Mohanty (1995).

Within tourism sector hospitality industry was probably the first one
to recognize the importance of the guests satisfaction. However, many
hotels are still struggling to reach a real understanding of what is meant

118
by TQM. Breiter et al. (1995) give the example of quality management
implementation process in a Bergstrom Hotels case study. They identify
main problems of the practical implementation of TQM principles.
Bergstrom Hotels experiences are important because they prove that
quality can be achieved with standard staffing levels and reasonable
investment.
Bergstrom has designed a culture that is quality oriented. A shared quality oriented
vision is achieved, largely through communications, relationships, culture
measurement and training. Customer satisfaction is understood
through the use of surveys and interviews and continuous improvement
of processes is the job of all Bergstrom employees. Open lines of
communication are essential to the success of quality management
because they help to develop and improve relationships between inter
nal customers. Management saw the need to design a more effective
system for allowing employees to contribute ideas and suggestions and
processes for building awareness of the companys quality initiatives
were needed. Managers believed they could improve communication
with employees, so as to share information on quality progress, either
individually or on a team basis. Employees and managers needed to
share information openly about the hotels performances and what the
teams were doing.
However despite many improvements made some difficulties
occurred. Because the number of employees involved in teams was
relatively small, true representation of all employees did not exist. This
led to a lack of universal commitment. Also, barriers between the
quality teams and other employees arose. An litist structure emerged
where team members were in and everybody else was out. An example
of this occurred when a server asked to be on the restaurants quality
team but was told all the positions were filled. The server responded
that she wanted to get involved and had some ideas to contribute but
was being told she could not participate. Employees who were not on
teams thought that their contributions were not welcome (Breiter et
al., 1995).
Another apparent problem was that employees were not sure what
management wanted and felt they were not given enough direction.
That is why all employees had to be trained in quality concepts and
tools.
An analysis of experiences of 21 companies (Mann and Kehoe,
1995) enabled a guideline to be developed showing how each company
characteristic affects an implementation of TQM. By identifying their
most critical factors, methods can then be developed to minimize the
difficulty:

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factors effecting 1. Process factors.
the success An organizations method of manufacture or serving their custo
of TQM mers can hinder the application of quality activities. Traditional service
implementation and production methods may encourage job specialization. In these
process circumstances it may be difficult for employees to become actively
involved in the improvement of work processes. However, it is impor
tant that they are involved in the TQM effort, to prevent any feelings
of alienation. Many organizations are surprised how employees, given
the correct support (particularly resources) and encouragement, can
make an active contribution to the organization and their working
environment.

2. Type of employees.
The diversity of employees can present problems when imple
menting TQM. It is recommended that representatives of each type
of employee13 are involved in the development of the TQM imple
mentation plan. This will ensure that training and TQM activities take
into account their particular needs. If the needs of employees, as listed
below, are considered, TQM can be effectively implemented:
education, skills Skill level. Highly skilled employees are likely to accept TQM more
and lenght of quickly than lower skilled employees. They are less likely to feel
employment threatened by proposed changes and are more likely to understand
its need. Organizations wishing to increase the autonomy of their
workforce may need to improve the skill level of their employees.
Level of education. Employees with a high level of education are
likely to accept TQM more quickly. Individuals with a high level of
education are more likely to judge TQM by its results rather than
through its publicity. Whatever the level of education, it is important
to note that publicity and posters may be viewed cynically and can
create high expectations which are difficult to meet.
Length of employment. Employees who have worked in an organi
zation for a long time can be the hardest to convert to TQM. They
are likely to have witnessed many new management approaches and
initiatives. If these approaches were not as successful as expected,
then these employees are likely to be sceptical towards the imple
mentation of TQM. The most effective method of converting these
employees to TQM is through their involvement in quality activi
tieswhich produce improvements. With regard to job ownership,
employees who have worked in a certain position for a number of
13 It can be easily illustrated through the example of hotels, where organizational
structure reflects the diversification of employees (reception desk, restaurant,
clean and laundry etc).

120
 years often do not want any increased responsibility. New responsibi
lities for some employees may cause distress. It is therefore important
to consider each individual's needs before implementing changes
which affect them.
Age distribution of employees. An "old" workforce may not accept age, maturity and
change as quickly as a "young" workforce. An old workforce may external contacts
feel threatened at having to learn new responsibilities and use
newwork methods. It is therefore important to have a comprehen
sive education and training programme tailored to their needs.
Agradual approach to TQM which gains their confidence, may be
appropriate.
Employees level of external customer contact. Employees in close
contact with the customers are more likely to accept TQM. This is
because quality activities are typically associated with final results.
For this reason it is important in the planning of TQM to discuss how
TQM will be implemented in low customer contact areas. Asolution
would be to develop specific training programmes for these areas
providing practical applications of relevant quality activities. Quality
activities concentrating on improving the service (product) between
internal suppliers and customers may be appropriate.

3. Shared values.
Employee's attitude towards change. A positive attitude by employees attitudes
towards change assists in the implementation of TQM. A negative towards change
attitude can be changed through education and training and the and business
involvement of employees in quality activities which result in performance
improvements. After the implementation of an education and
training programme, it is important that involvement shortly follows,
otherwise employees may become disillusioned. The setting up of
acommunication structure between management should aim to
install a culture whereby employees recognize problems and solve
them automatically (as part of their responsibility).
Business performance. The relationship between business perfor
mance and TQM acceptance is complex. Organizations with an
excellent business performance may accept the need to change as
anecessary prerequisite for success, or alternatively, employees may
react against TQM as they fail to understand the need to change
asuccessful system. Similarly, organizations in a "survival situation"
may act positively to change as "it's their last chance", or negatively
owing to previous poor experiences. The attitude of the employees,
due to the organization's business performance, should be considered
when deciding the rate of implementation.

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 organizations Organizations age. TQM is likely to be more quickly accepted in
maturity and work anew organization or a young organization rather than in an
environment established one. A new or young organization can introduce TQM as
a natural element of its organization.
Work methods. Employees used to traditional working methods such
as we do our job and someone else it to check it are likely to find
itdifficult to accept the TQM concepts. These employees have proba
bly been educated and trained in the values of job specialization,
delegation, inspection and control, and are likely to react adversely
to the same management advocating new values and methods. In
contrast, employees using new technology are more likely to have
experienced changing working methods. The experience of new
working methods should encourage a more open attitude to concepts
such as TQM.
quality Understanding of quality improvement needs. Employees who under
improvement stand the need for quality improvement are more likely to accept
needs TQM. For this reason, acceptance is likely to be high for organi
zations with a high level of quality development which have witnessed
the benefits of quality activities.
motivating/ Salary. Employees with poor salaries are less likely to be enthusiastic
dismotivating for TQM. These employees are likely to feel undervalued by top
factors management and will be suspicious of any new approaches. Organi
zations using a performance appraisal system will probably need to
change the appraisal system to support the aims of TQM.
Working conditions. Employees working in poor working conditions
are less likely to be enthusiastic for TQM. Similar to employees with
low salaries, these employees are likely to feel undervalued by top
management and will be suspicious of any new approaches.

4. Management style.
Top management's attitude towards change. It is essential that, prior
to TQM implementation, all members of the board support the
proposed approach. If the managing director or board do not
demonstrate their total commitment and total involvement in TQM
then it is at risk. The top managers/directors need to be "champions
of quality".
different levels Middle management's attitude towards change. Middle management
management can be difficult to convert to TQM. Many managers may have been
attitude towards with the organization for a number of years and are used to a certain
change style of management. It may be difficult for them to give greater
responsibilities to employees and change to a more participative style
of management. In addition, they themselves may be controlled more

122
 by the incoming TQM structure. To gain the middle management's
commitment and confidence in and a support structure needs to be
developed to assist them through the change period. Without the
total commitment of middle management, team building and
employee involvement will be affected.
Junior managements attitude towards change. Junior managers can
have the same problems as middle managers in accepting change.
Those used to fire-fighting and delegating to employees may have
difficulty in changing to a more participative style of management.
As they are often the direct link between employees and manage
ment, it is important that they fully understand TQM. As the manage
ment style of junior managers is typically not as developed as middle
managers, they are likely to accept TQM more quickly.
Leadership style. TQM aims to encourage a participative style of
management throughout the organization. An organization with this
style of management is likely to be more enthusiastic towards TQM
and will have less need to change its systems and communication
structure. Organizations with an authoritative style of management, leadership style
whereby employees/ managers are promoted who are aggressive, and management
career minded and not team workers, are likely to find it more planning
difficult. To achieve a participative management style, it may, at first,
be necessary to use an authoritative leadership style to implement
TQM. This may consist of delegating and monitoring the perfor
mance of quality activities. Through the implementation of quality
activities, such as teams, and top management leading by example, a
more participative style of management can develop.
Management planning. Organizations driven by short-term planning
may find it difficult to change to TQM where the emphasis is on long-
term planning. Rewards, such as promotion for quick results invol
ving fire-fighting, need to be redirected to rewards for prevention
and participation activities. Long-term planning can begin by imple
menting a comprehensive education and training programme.
Departmental interaction. Organizations which are function oriented co-operation
and/or encourage specialization may have difficulty in converting to and interaction
TQM. Barriers to departmental interaction (e.g. rivalry), need to be between
removed in order for TQM to operate successfully. Teams which departments
concentrate on improving cross-functional integration can help to
achieve this.

5. Organizational structure.
Organizational structure description (number of sites). TQM is
generally easier to implement within one site than in a number of

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 sites. The larger the number of sites, the greater the difficulty of
controlling its implementation and developing an integrated
approach to TQM (if required).14 The greater the number of sites,
the more likely they will differ with regard to quality development.
Stability of organizational structure. If the organizational structure
is stable then TQM will be easier to implement. An unstable organi
zational structure can threaten the implementation of TQM.
Forexample, the merging of two sites could adversely affect the
structural elements of TQM already in place, like delegated teams.
Also, the departure of committed TQM personnel, particularly
members of the site board, can threaten the impetus and drive for
TQM.
Geographically integrated. Organizations implementing TQM into
sites geographically distanced from each other may find it more
difficult to implement an integrated TQM approach. The physical
distance between sites may hinder the transfer of information
andweaken the effect the corporate board's leadership style and
approach has on each site. In addition, sites geographically
distanced are likely to have different characteristic owing to the
effect of the local environment (local culture) on the organization's
employees.

6. Number of employees.
Generally, the smaller the number of employees, the easier it is to
implement TQM. At smaller sites, the steerers of TQM (usually the
management board) are more visible and have less employees to
manage and involve in TQM. This may mean a less detailed and
sophisticated implementation structure is required to ensure employee
participation and to improve business performance.

7. Quality development.
Organizations with a high level of quality development are likely to
be enthusiastic towards TQM. These organizations will understand the
need for quality improvement and are therefore less likely to require as
much training and education. They will be able to implement TQM
more quickly.

14 If you think of a travel agency having its sites in many cities or even countries
it seems quite difficult to keep the same level of quality commitment in every site.
However we can find the perfect example of success in this field in hotel industry
international hotel chains.

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10.5. Is TQM a miracle to happen?
TQM may not contribute significantly to improvement if poorly possibile
implemented. Two pitfalls concern a change in the behaviour, processes pitfalls in the
and attitudes of employees and heightened expectations since they wait implementation
for some sort of miracle to happen. There may also be an empowerment process
causing some loss of control. Some researchers warn about over
delegation by top management, placing the burden for change on the
employees and then blaming them for any failure. Senior management
should tackle the important issues of TQM, demonstrating leadership
and commitment. It may be also possible that some companies choose
the wrong strategy, the wrong tool or select merely one tool. Sometimes
the implementation of TQM is not successful due to the absence of
strategic planning and the lack of a system orientation. When each
department is trying to improve performance independently of others,
this can also lead to failure. Major TQM implementation problems may
also concern the lack of management commitment, poor communication
between departments and the perception of TQM as a fad or campaign
rather than a real, working system. Another study identified barriers
such as management compensation not being linked to achieving quality
goals, best practices of competitors not being benchmarked, insufficient
training in problem identification and problem solving techniques
andemployee resistance to change (Curry and Kadasah, 2002). The
organizational emphasis of tomorrow will probably be shifting towards
four main areas of the improvement of quality. These focus areas are: areas of quality
customer focus, process focus, innovation and environment (adapted improvement
from Mehra et al., 2001):
Customer focus. This approach has already been widely described.
However in the future development of quality ideas should cover also
customer partnership. It will require that the business get closer
tothe customer, not just physically but in many other facets. This
closeness should take the form of an enterprise wide sharing of ideas,
actions, and other planning aspects. Both parties, buyers and sellers,
are to assume ownership of all actions that occur in the supply
chain.
Information, specifically the flow of information, will become
acrucial element for future success. Trading partners will have to
facilitate synchronized flow of information in order to achieve a high
degree of responsiveness to the ultimate customer. It is expected that
businesses will have to achieve a high degree of integration of
processes between suppliers and customers. This will call for a new
management thinking, i.e. a focus on global thinking perspective. The

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 future supplier-customer partnership will yield a seamless entity
that will feel no pain in responding to changes because it will be
aseamless change. Managing quality will be replaced by managing
change with quality.
Process focus. Quality organizations of tomorrow will face a shift in
the management of process. This shift will require a true understand
ing of the process dynamics. Quality management efforts will heavily
emphasize self assessment of three major capabilities, i.e. human
resource capabilities, technical capabilities and financial capabilities.
This self analysis will be crucial before forming any strategic alliance
with customers to arrive at the seamless enterprise. Credible and
convincing self assessment will become necessary to forge long-term
relations with all trading partners having similar critical success
factor niches.
Innovation/improvement/knowledge focus. Without fast paced
responsiveness to changing customer demands will definitely cause
the demise of a business in the coming years of the new millennia.
Efficient consumer response, successfully practised by the food and
grocery industry, now comes to the door steps of manufacturers. The
service component of their business takes on a different meaning,
with after-sale service just a fading word. To provide for customer
satisfaction, businesses will have to plan perpetual growth processes
based upon innovation, improvements, and knowledge creation.
These efforts will require technological leadership in management
ranks of all trading partners. These partners will become knowledge-
creating organizations having synchronized knowledge workers
moving in the same direction. Hence, the flow of information and
timing of managerial actions will become critical in the quality
decisions.
Environmental focus. The last missing puzzle in quest for total
quality organization of tomorrow revealed another focal point of
attention, i.e. environmental focus. This is a three-dimensional focus
comprising government regulations, social/ethical issues, and market
dynamics.
Government regulations will stay a mystery in years to come due
tothe changing patterns of public opinions. The same will be true
ofsocial and ethical issues. However, such uncertainties will have
tobedealt with through early partnerships between governmental
organization and businesses. Such cooperative alliances will provide
timely and correct information to all trading partners, and hence, affect
the market dynamics through competition. It is in this respect that the
continuous improvement process component of TQM will take on

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anew role. This role will be innovation-based, attempting to discover
new knowledge (e.g. new technology to produce user friendly products
of higher quality). Creating knowledge on a routine basis will replace
the current mode of working that focuses on just doing the job.

10.6. TQM Concept in a Tourism Destination Area

Tourists needs are met not just by one product or service but by three
elements of the areas attraction (3As): accessibility, attractions, the 3 As of TDA
amanities (Holloway, 1996). Quality management of TDA includes the attraction
recognition of all the factors, products, services which create the image
of quality destination in the eyes of tourists. The problem seems to be
quite complicated as the geographical area is not the business unit in
asense we get used to when analyzing the activities of business
enterprises. At the same time from the point of view of tourism industry
development the level of TDAs quality management is of the upper
importance as this is a place of:
concentration of all the tourism enterprises activities, reasons for
creation of the tourism image, implementing
branding of tourism product, TQM in a tourism
cooperation of the public and private sectors, destination
last but not least meeting (or dis) tourists requirements.
Consumers in tourism typically purchase and consume a whole
range of services, which together make up the "holiday or vacation
experience". An inability of individual tourism companies to offer the
total quality tourism product that the customer expects at the
beginning of the tourist purchase consumption process leads to the
idea of the implementation of TQM within the whole tourism
destination area (Kachniewska 2004). According to such an approach
all the area should be treated as a system of public organizations,
private enterprises, local people (social environment), natural environ
ment and other tourist attractions as well as all the relations between
them.
On the grounds of systems theory, synergy is essential for the synergy effect in
success of a system. Synergy is defined as a situation in which separate TDA
subsystems (providers of various components of the tourism product
within the TDA) co-operate and interact with the result of becoming
more productive than they would be if they operated in isolation
(Stoner and Freeman, 1992). However co-operation between the
providers of tourism services within a TDA should be based on
formally established links in order to bring about the benefits of
synergy.

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TQM consortium Co-operative links may take various forms, such as a syndicate,
for TDA acartel, a pool or a consortium15. In the case of quality systems created
within tourism destination areas, the form of consortium proves to be
most desirable. There are some arguments for establishing a consor
tium (Augustyn, 1998): unlike a cartel, it is a formal association; unlike
a syndicate, it facilitates co-operation of all the parties within the TDA;
unlike a pool, it does not attempt to control price, to share the business
and to divide profits.
the concept of M. Augustyns idea of a Total Quality Tourism Consortium (TQTC)
TQTC can be established within a tourism destination area in order to ensure
synergy. The concept of TQTC (Figure XXII) assumes that represen
tatives (top managers) of various public, private and voluntary tourism
organizations, operating within a tourism destination area and willing
to co-operate, enter a special agreement aimed at tourism quality
enhancement while sharing the cost of the task.
The quality of tourism product contains tourists expectations,which
are formulated long before travel. It means that quality managementof
TDA should include the problem of information namely influencing
tourists expectations through a proper promotion of the areas tourism
product. The reliability of such information is quite often discrepant
from the advertising efforts of local government or enterprises, but still
taken into account by the tourists when taking the decision about
visiting the area.

Figure XXII: The concept of Total Quality Tourism Consortium

TOURISM DESTINATION
AREA

SECTOR
public/private/voluntary

accommodation,
catering,
attractions, TOTAL enhance QUALITY agreement CONSORTIUM
entertainment, TOURISM
recreational facilities, involvement Tourists Development of
infrastructure, in continuous expressed and an advanced
urban transport, improvement implied quality system
streets/roads, commitment requirements
Information centres, are met fully
hospitable behaviour,
other

Source: Augustyn (1998).

15 A consortium is a group of companies and/or public sector organizations that

cooperate for a specific purpose (Gilpin, 1973).

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 It is essential that quality is understood properly by all subsystems
inorder to enable the achievement of the objectives set by the system
(quality tourism products and increased customer satisfaction). This
mayrequire launching a quality awareness programme within the
system.Adopting the view of the customers in respect to the quality of
thetourismproduct constitutes a pre-requisite for identifying quality
improvement areas within the TQTC. With such understanding of quality,
benchmarking techniques and the model of service quality can be applied
as a means of gaining information about the competitors and customers.
TQM has been widely adopted in many manufacturing and service TQM concept in
organizations but still remains treated as the management system for TDA
asingle company. Its adoption to the reality of TDA requires a new look
on the area as a kind of very complex organization, where the group of
employees seems to be much wider then just the workers of all the local
enterprises. All the people living and working within TDA should be
treated as employees of this complex system, as customers (tourists)
impressions are influenced by all the local citizens, not only the
employees of tourism enterprises. Prior to employing the TQM princi
ples, it is essential to make sure that all members of the subsystems
focus on the customer as a purpose of whatever they do. Continuous
research and measurement of customer satisfaction are essential for
thepurpose of designing and re-designing the quality tourism product.
A dynamic approach to product development is required in order to
delight customers. This approach focuses on a continuous variation by
means of special events, such as surprise events or gifts not itemised in
an offer. A development of a consistent marketing strategy for the whole
system, based on the research results, constitutes an integral part of the
TQM process.
A smooth running of the TQM process demands creating teams,
securing proper communication, devising tools, building commitment
and quality culture within the system. Communication between indivi
duals and subsystems (internal) as well as between the system and the
suppliers and customers (external) enables the flow of information,
which is indispensable for making decisions within the system. Internal
communication with the emphasis on the progress in achieving the goals
of the system is needed in order to avoid discouragement. Devising tools
for delivering, sustaining and measuring quality is vital for ensuring high
and consistent levels of tourism quality within the entire system. Setting
quality standards, comparing performance against them and feedback
are extremely important for identifying opportunities for improvement.
It should be pointed out, however, that quality has to be built into the
system rather than inspected.

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 Generating enthusiasm among the executives and employees through
recognition and rewards is of utmost importance for the success of the
TQM process. Quality culture determines the ability of the system to
accept change within its morale and internal working relationships as
well as relations with the environment. Partnership relationships in
which everyone learns from each other constitute an important pre-
requisite for the success of the new tourism quality systems. Building
aquality climate is based on the principle of encouraging people to look
beyond preventing problems and seek opportunities for continuous
improvement.
local people The attitude of local people towards tourism development is quite
commitment as often very unfriendly, even in the areas which find the only way of their
asuccess factor economic activity in the development of tourism. Not all the inhabitants
participate indirectly in tourism prosperity and local government should
find the way to demonstrate the benefits connected with tourism
development of the area (higher profits, possible investments beneficial
not only to tourists but also to local people, development and increased
attractiveness of the area, improvement of the areas beauty and the
quality of natural environment etc.). Local government should keep it
inmind that without the inhabitants approval the TDAs product will
never be of really high quality. Its task is also the necessity to create
tourism consciousness of local people (tourism knowledge, the aware
ness of tourism economics) and to deal with myths and emotions
connected with tourism development which seems to be very difficult to
fight. It is also necessary to prepare funds to cover the costs of clearing
social dysfunctions in order to create friendly atmosphere around the
tourism function of the area. It is very difficult in case of local people
who feel much stronger the negative then positive effects of tourism
development.
environmental Quality management of the natural environment seems to be another
issues in the difficulty as the development of tourism industry could occur one of the
concept of TQTC most devastating factors (at least causing the permanent landscape
modifications) lowering tourism attraction of the area. Rich service offer
of TDA can become the source of its competitive advantage and at the
same time enables the relief of natural environment.
the necessity of Social and environmental strategies of TDA can not be properly
public-private developed without the public-private partnership. The public sector
partnership usually suffers from the lack of funds and inability to take risk while
theprivate sector does not poses the possibilities to form the complex
and complete quality offer of the area. Augustyn (1998) gives three
reasons of the limited influence of enterprises on the quality offer of the
TDA:

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 There is a lot of antagonism between what is profitable for different
companies, the society and the area as a whole.
The activity of enterprises concentrates on some chosen areas,
neglecting the other ones.
The abilities to absorb additional tourists may be limited by the
quantity of local tourism resources (especially natural ones).
The cooperation of public and private sectors may help to overcome
those gaps and ensure the sustainable tourism development. The mana
gement of a total quality tourism consortium is therefore responsible
for making the employees of participating organizations aware of this
in order to maintain enthusiasm and interest. Through the commitment
of the executives and involvement of all members of the system in
continuous improvement, the TQTC is in a position to assure compre
hensiveness and consistency of the quality management process. The
particular choice of the TQM tools depends, however, on the nature
ofthe internal and external environments in which a tourism quality
system operates.

11. ISO Management System Standards

11.1. International Organization for Standarization (ISO)

In 1946 in London, delegates from 25 countries decided to create a new
international organization, intended to facilitate the international the origin of ISO
coordination and unification of industrial standards. The new organi
zation, ISO16, officially began operations on 23 February 1947.17
ISO is an international, non-governmental network of the national ISO members
standards institutes of 148 countries, on the basis of one member
percountry, with a Central Secretariat in Geneva, Switzerland. It
occupies aspecial position between the public and private sectors.
Thisis because, on the one hand, many of its member institutes are
partof thegovernmental structure of their countries, or are mandated
by theirgovernment. On the other hand, other members have their
rootsuniquely in the private sector, having been set up by national
16 As International Organization for Standardization would have different

abbreviations in different languages (IOS in English, OIN in French for

Organisation Internationale de Normalisation), it was decided at the outset to use
a word derived from the Greek isos, meaning equal. Therefore, whatever the
country, whatever the language, the short form of the organizations name is
always ISO (www.iso.org).
17 To find more about historical perspective of ISO go to ISOs First Fifty Years

(www.iso.org/iso/en/aboutiso/introduction/fifty).

131
 partnerships of industry associations. Therefore, ISO makes an attempt
to act as a bridging organization in which a consensus should be reached
on solutions that meet both the requirements of business and the
broader needs of society, such as the needs of stakeholder groups like
consumers and users.
National member from every country takes the responsibility for:
informing potentially interested parties in their country of relevant
international standardization opportunities and initiatives;
ensuring that a concerted view of the countrys interest is presented
during international negotiations leading to standard agreements;
providing their countrys share of financial support for the central
operations of ISO, through payment of membership dues.
ISO standards ISO has been developing voluntary technical standards over almost
portfolio all sectors of business, industry and technology for over 55 years. One
ofthe best-known standards in the ISO portfolio is ISO 9001:2000,
Quality management systems Requirements but the great majority of
ISO standards do not relate to management system requirements. On
the contrary the vast majority of ISO standards are highly specific.
They include terminology, sampling, test and analytical methods, as
wellas specifications and performance requirements for industrial and
agricultural products, equipment, processes and, to a growing extent,
services. ISO standards18 were, before ISO 9000 and ISO 14000, princi
pally of concern to engineers and other technical specialists concerned
by the precise scope addressed in the standard. The Organization has
more than 3000 technical bodies (committees, working groups) respon
sible for over 4000 active standards projects (ww.iso.org).
ISO standards are voluntary19 and developed according to the princi
ples of consensus among relevant stakeholders (e.g. service providers,
consumer groups, governments, research organizations). The process is
market-oriented, needs-driven and based on voluntary contribution and

18 ISO is the worlds largest developer of voluntary international standards. Every

year, ISO publishes approximately 1000 new or revised standards in fields ranging
from health care to industrial machinery; from screw threads to financial planning;
and from materials and testing to quality and environmental management. As of
the end of 2004, there were 14251 published standards and related publications in
ISOs collection.
19 As a non-governmental organization, ISO has no legal authority to enforce

their implementation. A certain percentage of ISO standards mainly those

concerned with health, safety or the environment has been adopted in some
countries as part of their regulatory framework, or is referred to in legislation for
which it serves as the technical basis. Such adoptions are sovereign decisions by
the regulatory authorities or governments of the countries concerned. However,
although ISO standards are voluntary, they may become a market requirement.

132
involvement of relevant interests. Participation in the process is
accomplished through national delegations and their appointed experts.
In addition, ISO maintains liaison with over 500 international and
broadly based regional organizations that participate in its technical
work (www.iso.org).
Most standards require periodic revision. Several factors combine to ISO standards
render a standard out of date: technological evolution, new methods revision
and materials, new quality and safety requirements. That why ISO has
established a general rule that all ISO standards should be reviewed at
intervals of not more than 5 years. On occasion, it is necessary to revise
a standard earlier. ISOs work programme ranges from standards for
traditional activities, such as agriculture and construction, through
mechanical engineering, to medical devices, to the newest information
technology developments, such as the digital coding of audio-visual
signals for multimedia applications.

11.2. Management System Standards.

The vast majority of ISO standards are highly specific to a particular
product, material, or process. Despite the fact that for 50 years ISO
published mainly technical standards the organization gained the real ISO quality and
popularity thanks to management system standards to be more environment
precise families of standards namely ISO 9000 and ISO 14000. ISO management
9000 is primarily concerned with quality management, while ISO standards
14000 is concerned with environmental management both of great
interest to the tourism industry.
Both families consist of standards and guidelines relating to
management systems, and related supporting standards on terminology
and specific tools, such as auditing (the process of checking that the
management system conforms to the standard). Notice that neither ISO
9000 nor ISO 14000 are product standards. The management system
standards in these families state requirements for what the organization
must do to manage processes influencing quality (ISO 9000) or the
processes influencing the impact of the organizations activities on the
environment (ISO 14000). This is a very important fact as a lot of ISO are ISO
9000 opponents (especially in tourism sector) stress that implementation management
of such standards in tourism industry would mean the standardization of standards for
tourism offer and hence would cause a negative effect, as tourists look tourism
for unique products, enabling them to express their individuality and enterprise?
satisfy their educational and emotional needs. The same opponents
indicate the example of international hotel chains where high level of
standardization has completely disturbed national individuality of local

133
 standardisation hotels. Standarization of hotel product was aimed most of all at the
versus quality assurance and enhancement but in fact well educated and
customisation in demanding tourists perceive it as a sign of quality decline. Once again
tourism this is the evidence of a quality gap: hotel managers perceive quality in
an absolutely different way then hotel guests.
To avoid such misunderstanding there is a necessity to stress again
that quality management system (QMS) principles presented in ISO
9001 standard are not aimed at standardization of any product (whether
service or manufacturing). The standard is to assist managers when
implementing or restructuring the quality-based system of management.
All the principles of ISO 9001 construct the framework, and within that
framework every organization builds up its own, unique system. QMS
standard does not describe the characteristics of the final product but
includes a set of principles pointing what the organisation is to do to
ensure that its products conform to the customers and applicable
regulatory requirements and to improve continually its performance in
this regard. ISO quality management system is also expected to address
the needs of the service industries as it will focus on customer satisfac
tion, management leadership, process management and continuous
improvement through teamwork.
Both ISO 9000 and ISO 14000 concern the way an organization
goesabout its work, and not directly the result of this work. In other
words, they both concern processes, and not products at least, not
directly.
Nevertheless, the way in which the organization manages its
processes is obviously going to affect its final product. In the case of ISO
9000, the efficient and effective management of processes is, for
example, going to affect whether or not everything has been done to
ensure that the product satisfies the customers quality requirements. In
the case of ISO 14000, the efficient and effective management of
processes is going to affect whether or not everything has been done to
ensure a product will have the least harmful impact on the environment,
at any stage in its life cycle, either by pollution, or by depleting natural
resources. This means what the organization does to minimize harmful
effects on the environment caused by its activities.
ISO 9001 as In both cases, the philosophy is that management system require
ageneric standard ments are generic they can be applied:
to any organization, large or small, whatever its product,
including whether its "product" is actually a service,
in any sector of activity, and
whether it is a business enterprise, a public administration, or
agovernment department.

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 No matter what the organization's scope of activity, if it wants to
establish a quality management system or an environmental manage
ment system, then such a system has a number of essential features for
which the relevant standards of the ISO 9000 or ISO 14000 families
provide the requirements.20
Although ISO has no plans to merge the ISO 9000 and ISO 14000 the idea of
families, the Organization is nevertheless sensitive to the needs of integrated
users who wish to implement both quality and environmental manage management
ment systems. Therefore, the ISO technical committees ISO/TC 176
(responsible for ISO 9000) and ISO/TC 207 (responsible for ISO
14000) have an ongoing collaboration to achieve a high degree of
compatibility between the two families of standards to facilitate their
implementation by user, either as side-by-side systems, or as integrated
management systems (www.iso.org). This collaboration addresses such
issues as common terminology and structure of the standards but its
biggest achievement so far is the development of a joint auditing
standard for quality management systems (QMS) and environmental
management systems (EMS).
Both the ISO 9000 and ISO 14000 families of standards emphasize standard audit
the importance of audits as a management tool for monitoring and procedures
verifying the effective implementation of quality and/or environmental
management. ISO 19011 provides a uniform approach for the auditing
of environmental and quality management systems. As many organi
zations implement both EMS and QMS either as separate systems,
or as an integrated management system they want to harmonize and,
where possible, combine the auditing of these systems. The use of
uniform auditing standard will give organizations a more integrated
and balanced view of their operations, making it a tool for continuous
improvement. It is also aimed to help organizations optimize their
management systems, facilitate the integration of quality and environ
mental management, save money and decrease disruption of work
units being audited.
Table XI contains the list of quality management standards
(standards irrelevant for tourism enterprise were skipped21). Only one
of those standards is intended for certification namely ISO 9001:2000.
What are the other standards for?

20 Where any requirement(s) of ISO 9001:2000 standard cannot be applied due

to the nature of an organization, this can be considered for exclusion however
such exclusions may not affect the organizations ability to provide product that
meets customer and applicable regulatory requirements.
21 ISO/TR 13352:1997 (Guidelines for interpretation of ISO 9000 series for appli

cation within the iron ore industry) or ISO 13485:1996 (QS Medical devices).

135
 Table XI: ISO 9000 family and complementary standards
ISO 9000 family basic standards
Quality management systems Fundamentals and
ISO 9000:2000
vocabulary
ISO 9001:2000 Quality management systems Requirements
Quality management systems Guidelines for
ISO 9004:2000
performance improvements
ISO 9000 family complementary standards
Quality management Customer satisfaction
ISO 10002:2004
Guidelines for complaints handling in organizations
Quality management systems Guidelines for quality
ISO 10005:2005
plans
Quality management systems Guidelines for quality
ISO 10006:2003
management in projects
Quality management systems Guidelines for
ISO 10007:2003
configuration management
Measurement management systems Requirements for
ISO 10012:2003
measurement processes and measuring equipment
Guidelines for quality management system
ISO/TR 10013:2001
documentation
ISO/TR 10014:1998 Guidelines for managing the economics of quality
ISO 10015:1999 Quality management Guidelines for training
ISO/TR 10017:2003 Guidance on statistical techniques for ISO 9001:2000
Guidelines for the selection of quality management
ISO 10019:2005
system consultants and use of their services
Guidelines for quality and/or environmental
ISO 19011:2002
management systems auditing
Source: adapted from http://www.iso.org/iso/en/CatalogueListPage

ISO 9000:2000 ISO 9000:2000 standard describes fundamentals of quality manage

standards ment systems, which form the subject of the ISO 9000 family, and
contents defines related terms. This International Standard is applicable to the
following:
organizations seeking advantage through the implementation of
aquality management system;
organizations seeking confidence from their suppliers that their
product requirements will be satisfied;
users of the products;
those concerned with a mutual understanding of the terminology
used in quality management (e.g. suppliers, customers, regulators);

136
 those internal or external to the organization who assess the quality
management system or audit it for conformity with the requirements
of ISO 9001 (e.g. auditors, regulators, certification/registration
bodies);
those internal or external to the organization who give advice or
training on the quality management system appropriate to that
organization;
developers of related standards.
ISO 9001:2000 (intended for certification) specifies requirements for ISO 9001:2000
a quality management system where an organization: requirements
needs to demonstrate its ability to consistently provide product that
meets customer and applicable regulatory requirements, and
aims to enhance customer satisfaction through the effective applica
tion of the system, including processes for continual improvement
of the system and the assurance of conformity to customer and
applicable regulatory requirements.
ISO 9004:2000 provides guidelines beyond the requirements given in ISO 9004:2000
ISO 9001 in order to consider both the effectiveness and efficiency of a as a way to
quality management system, and consequently the potential for continuous
improvement of the performance of an organization. When compared improvement
to ISO 9001, the objectives of customer satisfaction and product quality
are extended to include the satisfaction of interested parties and the
performance of the organization.
The focus of this International Standard is the achievement of
ongoing improvement. This International Standard consists of guidan
ceand recommendations and is not intended for certification, regula
toryor contractual use, nor as a guide to the implementation of ISO
9001.
One of the most interesting of complementary standards however ISO
rarely mentioned in literature is ISO 10002:2004 which provides complementary
guidance on the process of complaints handling related to products standards
within an organization, including planning, design, operation, main
tenance and improvement. The complaints-handling process described
is suitable for use as one of the processes of an overall quality manage
ment system. Annex A provides guidance specifically for small busi
nesses.
ISO 10002:2004 addresses the following aspects of complaints
handling:
enhancing customer satisfaction by creating a customer-focused
environment that is open to feedback (including complaints),
resolving any complaints received, and enhancing the organization's
ability to improve its product and customer service;

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 top management involvement and commitment through adequate
acquisition and deployment of resources, including personnel
training;
recognizing and addressing the needs and expectations of complai
nants;
providing complainants with an open, effective and easy-to-use
complaints process;
analysing and evaluating complaints in order to improve the product
and customer service quality;
auditing of the complaints-handling process;
reviewing the effectiveness and efficiency of the complaints-handling
process.
ISO 10002:2004 is not intended for certification but constitutes
akindof assistance for those managers who look for some sophistica
tedsolutions.

11.3. ISO 9000 as a Route to Implementing TQM

lack of Up to the present total quality management (TQM) seems to be the
requirements most advances system which can finally guarantee real quality improve
as TQMs ment to the companies. The main disadvantage of TQM is the lack of
disadvantage any clear requirements and directions, which could be used by managers
for audits, which would enable external conformance assessment etc.
It was intended that ISO 9000 series is to overcome the above
mentioned shortcomings. The development and application of a QMS
conforming to ISO 9001 should help companies to better organize and
synchronize their operations by:
documenting their processes,
clearing out ambiguities,
and clearly defining duties and responsibilities among employees and
departments, thus enabling them to construct the clear and effective
customer oriented system.
ISO 9001 The principles of ISO 9000 family (see below) are as close as possible
principles close to to the philosophy of TQM. The greatest and most important advantage
TQM philosophy of ISO standards lies in the fact that they introduce a preventive way of
managing quality, focusing mainly on the prevention of errors, rather
than their later detection and correction, which was the focus of the
traditional "quality control". It emphasises also the significance of
interpersonal relationship in the service process and human influence
on the service quality.
Despite the intentions there is a general confusion and uncertainty
regarding the effectiveness of ISO management system standards and

138
their long-term contribution to the companies. Quite a lot of managers
and researchers doubt whether ISO 9001 can really serve as the path
toprofessional quality management systems, especially TQM. This
dilemma regards the degree to which the development and certification
of a quality assurance system, according to the ISO 9000 series of
standards, can finally guarantee real quality improvement to the
companies that apply it.
The pessimistic view (Corrigan, 1994, Henkoff, 1993, Johannsen, shortages of ISO
1995, Stephens, 1994) is based on the fact that companies focus mainly 9001 standard
on quick and easy certification, without real commitment to quality. This
may result in the development of a static system, which increases
bureaucracy and reduces flexibility and innovation, without guaranteeing
real and continuous improvement of products and processes and
improved satisfaction of the customer, who is finally the only judge of
quality. Also, the standards can not guarantee efficiency22, since the
processes are not necessarily evaluated for their efficiency before they
get documented, while they also do not include any operational or other
business results in their requirements. Even more, it is claimed that in
cases of bad implementation, the company is more likely to move one
step backwards instead of forwards, because of the general disappoint
ment and resentment caused to the employees by the excessive bureau
cracy and workload. (Gotzamani and Tsiostras, 2001).
The optimistic view is mainly based on the fact that the standards ISO 9001
offer a well-structured tool to start with quality, making much easier standards
top managements commitment to it. In strictly operational sense QMS advantages
conforming ISO 9001:
decrease the gap between the current quality management environ
ment and TQM for the majority of the companies,
offer a shift in focus from the final products (services) to the
processes that produce these products (services),
improve internal organization and operation,
ensure a more effective and uniform communication throughout the
company,
increase employees' awareness in quality issues,
lower quality variations and quality related costs,
increase customers' satisfaction and trust to the company
encourage continuous improvement through regular and imperative
quality audits.

22 In fact ISO 9004 standard includes the efficiency requirement. Regretfully the
majority of enterprises concentrate only on ISO 9001 requirements as it is the only
standard in ISO 9000 family intended for certification.

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 It is also claimed that although the shortages of ISO 9001 standard
compared to TQM are far too many, the conscientious and consistent
implementation of their fixed and clear requirements can offer a good
first step towards TQM, for which no formal requirements exist. Even
more, the quality assurance system, when properly implemented by the
companies, represents a sub-system of TQM, while its final certification
increases responsibility and commitment to quality.
determinants for The key determinant for standards success is the depth to which
standard success acompany desires to proceed in satisfying their requirements. Those
companies limiting their efforts to the satisfaction of the minimum
necessary requirements for certification, will not be able to realize the
full potential of the standards and are likely to fail. On the contrary,
companies can really benefit from the process if they see the standards
as an opportunity to organize and improve their internal operations and
quality, by creating a dynamic and ever-improving quality system that
may evolve in a TQM system. The real benefits can be realized only
when the companies that apply them truly understand both their
capabilities and their limits. (Henkoff, 1993).
The basic arguments of both the views are mainly based on personal
assertions and isolated experiences of certified companies there is the
lack of formal empirical research on this issue. What can be of interest
to the tourism sector (dominated by micro-enterprises), the standard's
contribution was found to be higher for SMEs. However the companies'
efforts after certification should focus more on the "soft" elements of
TQM, like HRM, leadership, suppliers' relations and customer focus, as
they proved to be the ones with the lowest performance improvement
from certification. This notice can be explained by the fact that the
majority of companies covered by the studies were certified according to
the requirements of the old ISO 9000 family. Only few of them had
apossibility to conform to the new ISO 9000 series23, which addresses
these soft quality issues.
8 quality The quality management system standards of the revised quality
management management series are based on the eight quality management princi
principles ples (ISO 9000:2000):
according to ISO 1. Customer focus.
9000 family 2. Leadership.
3. Involvement of people.
4. Process approach.
5. System approach to management.
6. Continuous improvement.

23 The revision took place in 2000.

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7. Factual approach to decision making.
8. Mutually beneficial supplier relationships.
These principles can be used by senior management as a framework
to guide their organisations towards improved performance. They are
all defined in two ISOs standards: ISO 9000:2000, Quality management
systems Fundamentals and vocabulary and in ISO 9004:2000, Quality
management systems Guidelines for performance improvements.
Principle 1 Customer focus comes from the simple and obvious customer focus
notice that organisations depend on their customers and thereforeshould
meet customer requirements and strive to exceed their expectations.
Customer focus stresses also the need to measure customer satisfaction
and to act on the results as well as to communicate customer needs and
expectations throughout the organisation. Customer focus should
however ensure a balanced approach between satisfying customers and
other interested parties (owners, employees, suppliers, financiers, local
communities and society as a whole).
Principle 2 Leadership establish unity of purpose and direction leadership
of the organisation. Top management is required to generate a condu
cive environment to enhance the development of the system. Good
quality service does not happen by accident it occurs as a result of
planned and intelligent effort. The key benefit of the principle is better
understanding of the organisations goals by the employees as well as
better possibility of motivating people towards these goals.
Principle 3 Involvement of people stresses that people at all levels involvement of
are the essence of an organisation and their full involvement enables people
their abilities to be used for the organisations benefit. Applying this
principle will ensure motivated, committed and involved people within
the organisation as well as innovation and creativity in furthering the
organisations objectives. Total commitment is essential there must be
an uncompromising commitment to maintain or improve the quality
level, starting with the most senior management and floor downwards.
Involvement of people makes them:
understand the importance of their contribution and role in the
organisation,
identify constraints to their performance,
accept ownership of problems and their responsibility for solving
them,
evaluate their performance against their personal goals and objectives,
actively seek opportunities to enhance their competence, knowledge
and experience,
freely share knowledge and experience,
openly discuss problems and issues.

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process approach Principle 4 Process approach enables an organization to lower the
costs and to short cycle times through effective use of resources,
improve, consistent and predictable results and focus improvement
opportunities.
A process in an organization refers to a group of logically related
tasks (decisions and activities) that, when performed, utilize the
resources of the business to produce definitive results (Kane, 1986).
Any process must yield a product/service; any product/service is the
outcome of a process (Zarafian, 1987). Here are some common place
criteria to distinguish between processes and activities (adapted from
Briffaut, Saccone, 2002):
a process can aggregate several activities controlled by different
departments (matrix organisation);
a process can be viewed as a chain reaction of interrelated activities
triggered by an external event (complaints office);
a process can be considered as chained activities organised to
reachagoal (market- or product-oriented organisation, retailing
channels);
a process can be defined in relation to suppliers and customers.
system approach Principle 5 System approach to management means improvement
of the organizations effectiveness in achieving its objectives through
identifying, understanding and managing interrelated processes as
asystem.
Management system should be structured in such a way that it
enables the achievement of the organizations objectives in the most
effective and efficient way. It involves understanding of the inter
dependencies between the processes of the system as well as roles and
responsibilities necessary for achieving common objectives and thereby
reducing cross-functional barriers.
continuous Principle 6 Continuous improvement. Continual improvement of
improvement the organizations overall performance should be a permanent objective
of the organization. Applying the principle of continual improvement
typically leads to (www.iso.org):
employing a consistent organization-wide approach to continual
improvement of the organization's performance,
providing people with training in the methods and tools of continual
improvement,
making continual improvement of products, processes and systems
an objective for every individual in the organization,
establishing goals to guide, and measures to track, continual
improvement,
recognizing and acknowledging improvements.

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 Principle 7 Factual approach to decision making means that factual approach
effective decisions should always be based on the analysis of data and to decision
information. Applying this approach the organization gets an increased making
ability to demonstrate the effectiveness of past decisions through
reference to factual records as well as to review, challenge and change
opinions and decisions. In order to apply the principle an organization
should ensure that data and information are sufficiently accurate and
reliable, accessible to those who need it (www.iso.org).
Principle 8 Mutually beneficial supplier relationships. According mutually
to the principle an organization and its suppliers are interdependent and beneficial supplier
a mutually beneficial relationship enhances the ability of both to create relationships
value. Applying principle 8 an organization gets an increased ability
tocreate value for both parties as well as flexibility and speed of
jointresponses to changing market or customer needs and expecta
tions(optimization of costs and resources). This can be done through
establishing relationships that balance short-term gains with long-term
considerations, pooling of expertise and resources with partners, identi
fying and selecting key suppliers, clear and open communication, sharing
information and future plans, inspiring, encouraging and recognizing
improvements and achievements by suppliers.
The new ISO 9000:2000 standards for quality management systems
reflect some of these advancements and higher demands. For example,
instead of the sole emphasis being on the customer needs and expec
tations, all stakeholders are now concerned, including customers,
suppliers, managers, employees, local community and society, in
general(Karapetrovic, Willborn, 2002). Such developments continue
tochallenge quality practitioners to master additional, modern, total
quality management approaches and integrate them into management
methods (Andersen, 2000). Only those professionals who understand
that quality is derived from effectively managing systems will (be able
to) provide leadership in the new millennium (Chong, 2000).

12. Registration to ISO 9001

12.1. International Standardization

Standards make an enormous contribution to most aspects of our lives
although quite often their contribution is invisible. People usually
realize the importance and the necessity of standards when there is ISO standards
alack of them. That is why usually we are unaware of the role played contribution to
bystandards in raising levels of safety, reliability, efficiency and everyday life

143
 interchangeability as well as in providing such benefits at an econo
mical cost (www.iso.org). International Standards provide a reference
framework, or a common technological language, between suppliers and
their customers which facilitates trade and the transfer of technology.
Table XII contains some examples of international standards that
have been widely adopted, giving clear benefits to industry, trade and
consumers. The widespread adoption of International Standards means
that suppliers can base the development of their products and services
on specifications that have wide acceptance in their sectors. This, inturn,
means that businesses using International Standards are increasingly
free to compete on many more markets around the world.

Table XII: Examples of International Standards

film speed code,

standardization of the format of telephone and banking cards,
the internationally standardized freight container, which enables all
components of the transport system (air and seaport facilities, railways,
highways, packages) to interface efficiently,
m, kg, s, A, K, mol, cd are the symbols representing seven base units for the
universal system of measurement known as SI (it is covered by a series of
4International Standards),
paper sizes (A4, B5 etc.),
symbols of automobile controls,
international codes for country names, currencies and languages, which help
to eliminate duplication and incompatibilities in the collection, processing
and dissemination of information.

Source: www.iso.org.

main advantages The worldwide compatibility of technology which is achieved when

of international products and services are based on International Standards brings an
standardisation increasingly wide choice of offers. Customers benefit from the effects of
competition among suppliers.
For governments, International Standards provide the technological
and scientific bases underpinning health, safety and environmental
legislation.
There are also important benefits for developing countries. By
defining the characteristics that products and services will be expected
to meet on export markets, International Standards give developing
countries a basis for making the right decisions when investing their
scarce resources and thus avoid squandering them.
Conformity of products and services to International Standards
provides assurance about their quality, safety and reliability. Internatio
nal Standards on air, water and soil quality, and on emissions of gases

144
and radiation, can contribute to efforts to preserve the environment.
Extraordinary example of International Standard that contributes to
sustainable development, and is applicable to all fields of activity
(including tourism) and related services, is the ISO 14000 series of
environmental management standards.24
The importance of International Standards is growing and is fuelled
by such trends as increased globalization, the convergence of techno
logies, and societal demand for quality, safety, consumer confidence,
environmental protection and sustainable development.

12.2. Rules and Motivation for Registration to ISO 9001

The service sector and in particular, the tourism industry is beginn standard
ing to appreciate the added value that the application of standards can implementation or
bring to the business. In this respect, the ISO 9000 series of standards registration
for QMS offer a powerful tool to raise quality and to improve mana
gement of all types and sizes of organizations in this sector. There are
numerous reasons why many companies are now developing their
quality systems. However do they have to implement

a system based on
ISO 900
1 standard?
Some managers take up such decision because of incorrect reasons. reasons for
They need a nice certificate hanging on the wall, they want to make registration
reference to the standard on company headed paper. Quite often they
need to get the kitemark symbol on the companys product, desperately
try to retain existing customers; or just hope to enforce discipline on
employees (making use of some fear of external audits). They naively
believe that after a short and rough certification procedure their
enterprise will get a certificate which can be used as panacea for all
theproblems. Small firm registration is often something they feel
compelled to do in order to stay on preferred supplier lists. Additional
reason might be some pressure from large customers. It is not a good
reason as it does not come from the companys own conviction that
system needs to be restructured. However, large customers pressure
sometimes may occur to be a good starting point for the revision of
companys inside procedures and final results. In fact implementation
of any quality system makes sense only in case the system is company-
wide and QMS principles are taken seriously.
24 In particular, the ISO 14001 and ISO 14004 standards provide a model
describing how organizations should establish environmental policies, objectives,
target, and programs. It details how an organization should analyze its business
processes, products and services that may impact on the environment and specifies
the implementation of processes to control and improve operational activities that
are critical to environmental performance.

145
 With such an attitude, the companies are less likely to understand
the standard and commit to continuous improvement. Getting a certifi
cate quickly becomes an ultimate goal but misunderstanding of the
requirements of the standard as well as ignorance of the real potential
costs and benefits involved in the ISO 9000 system development and
implementation prior to certification inflates expectations of many
firms which cannot be met by the reality. Failure to implement the
standard for the right reasons may prevent companies from gaining
potential benefits from the system. Consequently, these businesses are
unhappy with their performance.
In order to overcome all the above mentioned reasons for poor
performance, companies are to look for the efficient management
system. Why do they choose ISO 9001 standard then? Why dont they
look for their own way?
ISO standards The first reason for choosing ISO standards instead of building up
versus our own companys own management concept is convenience. The ISO 9000
way standards are based on the concept that certain minimum characte
ristics of a quality management system could be usefully standardized,
giving mutual benefit to suppliers and customers alike. The major
purpose of these standards is to provide an effective quality system
reflecting a companys practices of producing goods and services that
conform to specified requirements in order to enhance and facilitate
trade. Instead of building, testing and correcting its own quality system,
an enterprise can use a ready prescription, modifying it according to
its own needs.
In a very small organization, there is probably no system, as such,
just our way of doing things, and our way is probably not written
down, but all in the head of the manager or owner head. The larger the
organization, and the more people involved, the more the likelihood
that there are some written procedures, instructions, forms or records.
These help ensure that everyone is not just doing his or her own
thing, and that the organization goes about its business in an orderly
and structured way, so that time, money and other resources are
utilized efficiently. Large organizations, or ones with complicated
processes, could not function well without management systems. To be
really efficient and effective, the organization can manage its way of
doing things by systemizing it. This ensures that nothing important is
left out and that everyone is clear about who is responsible for doing
what.
ISO 9001 Management system standards provide the organization with
standard as amodel to follow in setting up and operating the management
amodel to follow system.This model incorporates the features on which experts in the

146
field have reached a consensus as representing the international state
of the art. A management system which follows the model or
conforms to the standard is built on a firm foundation of state-of-
the-art practices. The ISO 9000 family now makes these successful
practices available for all organizations when it comes to meeting their
objectives concerning quality and the environment.
Management system based on ISO 9001 provides the same benefits
as any other own-made quality system. However there are some
additional reasons for implementing the ISO standard and getting the
certificate. They are:
advantages accruing from the result of having a quality system that has value added
been independently assessed (customers are much less likely to act on of registration
their own special assessments thus saving everyones time and money, against ISO
the need for customer-supplier demonstrations of quality assurance standards
isreduced due to a third-party quality assurance certificate),
reduced need for auditing of the quality system by customers,
an open way to foreign markets by ensuring that ISO 9000 is
compatible with EEC and US quality procedures,
a good marketing tool the certification marks and symbols can be
used on publicity, packaging and company literature,
confidence coming from knowing that QMS system is under
independent surveillance,
in some countries the company's name appears in the national
register of quality assessed companies,
better document control leads to improved communication with
customers, suppliers and internally in the factory.
Before a company registers to ISO 9001 (before it is certified) its conformity
QMS has to be assessed for conformity against ISO 9001 standard. assessment
Conformity assessment means checking that products, materials,
services, systems or people measure up to the specifications of a relevant
standard.
Certification against ISO standards is not compulsory and a company
can implement ISO 9001 without external auditing and certification.
Like all ISO standards management system standards are voluntary.
Deciding to have an independent audit of QMS to confirm that it
conforms to ISO 9001:2000 is a decision to be taken on business
grounds, for example
if it is a contractual or regulatory requirement,
if it is a market requirement or to meet customer preferences,
if it falls within the context of a risk management programme,
if it will motivate employees by setting a clear goal for the develop
ment of QMS.

147
 internal benefits Organizations can implement QMS solely for the internal benefits
they bring in increased effectiveness and efficiency of operations,
without incurring the investment required in a certification programme.
However you should keep it in mind that without a certificate even the
most tremendous and effective system will not be able to communicate
in short and simple way that it measures up to the specifications of ISO
9001 standard. It does not influence the effectiveness of QMS itself but
means the loss of a very powerful marketing tool.
ISO itself does not carry out conformity assessment nor issues
certificates of conformity, however it worked out special standardsaimed
at unification of auditing and consultancy processes (ISO 10019:2005).
According to those standards conformity assessment (which is the basis
for certification) can be carried out by so called certification (registra
tion) bodies.
certification What is then a certification process and who can become a certifica
process tion body?
Both the ISO 9000 and ISO 14000 families contain a single
certification standard. In case of QMS it is so often mentioned ISO
9001 standard. Certification refers to the issuing of written assurance
(the certificate) by an independent, external body that has audited an
organizations management system and verified that it conforms to
therequirements specified in the standard. The auditing body then
records the certification in its client register and the procedure is called
registration. For practical purposes, in the ISO 9001:2000 contexts, the
difference between the two terms is not significant and both are
acceptable for general use.25 Likewise, the bodies that issue ISO 9000
certificates are referred to in some countries as certification bodies
and in others as registration bodies or registrars.
certification body The certification/registration body is independent from the customer
and supplier and thus called the third party as it represents neither
your company nor the customers. In some countries in order to become
authorized to certify other companies, a certification body needs to be
accredited. In most countries, accreditation is a choice, not an obligation
and a certification body operating nationally in a highly specific sector
might enjoy such a good reputation that it does not feel there is any
accreditation and advantage for it to go to the expense of being accredited. However many
accreditation body certification bodies choose to seek accreditation, even when it is not
compulsory, in order to be able to demonstrate an independent confir
mation of their competence.
25 One term is preferred over the other depending on the country. Certification
seems to be the term most widely used worldwide, although registration is often
preferred in North America.

148
 In the ISO 9001:2000 or ISO 14001:2004 context, accreditation refers
to the formal recognition by a specialized body an accreditation body
that a certification body is competent to carry out ISO 9001:2000 or
ISO 14001:2004 certification in specified business sectors. Certificates
issued by accredited certification bodies and known as accredited
certificates may be perceived on the market as having increased
credibility.
More than 360 000 organizations worldwide have been certified to
anISO 9000 and/or ISO 14000 standard. ISO 9000 and ISO 14000
certification is carried out independently of ISO by more than 720
certification or registration bodies active nationally or internatio
nally. The ISO 9001:2000 and ISO 14001:2004 certificates issued by
certification bodies are issued under their own responsibility and not
under ISOs name. That is the reason to be very careful when choosing
the certification body. It is worth to evaluate several certification bodies
and bear in mind that the cheapest might prove to be the most costly if
its auditing is below standard, or if its certificate is not recognized by
customers. It is also necessary to establish whether the certification body
has auditors with experience in your business sector and to follow the
publication of the ISO 9000:2000 series in order to establish whether the
certification body has integrated the evolution in the focus of the
standards from conformity to performance.
Another point to clarify is whether or not the certification body has
been accredited and, if so, by whom. Of course the fact that a certifica
tion body is not accredited does not, by itself, mean that it is not
areputable organization. ISO Directory of ISO 9001:2000 or ISO
14001:2004 accreditation and certification bodies might be useful as it
contains the list of certification bodies in the majority of countries as
well as information about the geographical extent of their operation.
There is a lot of certification bodies operating multinationally26, across accreditation
national boundaries regardless of the country where their headquarters bodies operating
are located, or of their accreditation status at home or abroad. 27 multinationally
Certification process in such a body might be costly but such certificate
represents much stronger marketing tool as the name and logo of the

26 For example: British Standards Institution (BSI), Bureau Veritas Quality

International (BVQI) Headquartered in Manchester, UNITED KINGDOM),
KEMA, Lloyds Register Quality Assurance Ltd (LRQA), TV Cert.
27 Even if your companys system has been certified by such a body you must

remember that there is no ISO mechanism governing the mutual recognition of

registration certificates delivered by third-party bodies to companies whos QMS
or EMS has been assessed.

149
 certification body is widely known and recognizable. It is especially
important when your company intends to operate on foreign markets.
the logo of ISO Upon certification, many organizations turn to ISO to request use
ofthe ISO 9000 logo. No such ISO logo exists. There is only the ISO
logo itself, which is a registered trademark. Unless authorized by ISO,
use of its logo is prohibited. ISO will not allow its logo to be used in
connection with the certification of management systems, even when
these certifications attest conformity to ISO 9001:2000 or ISO
14001:2004.
no ISO labelling Another misleading practice is giving the false impression that ISO
9001:2000 is a product quality label, or that ISO 14001:2004 is a label
signifying a green or environmentally friendly product. This is not
so. They are not product standards. Every hotel can work out its own
equipment or service standards (which cannot be certified according to
any ISO standard as ISO has no standards for hotel services) and at
thesame time conform to ISO quality system standard and apply for the
conformance assessment and the certificate of conformance. Such
certificate is not a guarantee of hotel services quality. The only thing
itsignifies is the conformance to quality management requirements
ofISO 9001. The objective of the certificate is to give the organizations
management and its customers confidence that the organization is in
control of the way it does things.

12.3. ISO 9001 in Tourism

Despite the growing popularity and increasing numbers of ISO 9000
certified companies across many public and private sectors in the
global economy (Ho, 1999, Holland, 1996), the standard has not found
many advocates within the tourism sector (Handszuh, 1996). Indeed
there is some reluctance and sometimes resistance on the part of public
reasons for and private tourism organisations towards ISO 9000. Many of them
reluctance generally reject ISO 9001 as a standard irrelevant for this sector, being
towards ISO 9001 sure that the ISO 9000 standards were written with the manufacturing
in tourism sector in mind. In fact the latest revision of ISO 9000 family (in the
year 2000) among others was undertaken in order to enable implemen
tation of the standard in service companies.
This negative image of ISO 9000 prevailing within the tourism
sector seems to be justified in view of two facts (Augustyn and Pheby,
2000).
First,

the knowledge of the standard is superficial and existing
research findings encourage the sector to reject the standard on the
grounds of its irrelevance to the tourism sector. As a result, ISO 9000
is not promoted as a tool for business excellence and there is a lack of

150
awareness of the standard and its potential benefits within tourism.
Consequently, there are very few tourism companies ISO 9000
registered, which in turn discourages undertaking research within this
area.

Figure XXIII: ISO 9000 and tourism: the vicious circle effect

Irrelevavant: reject

Superficial knowledge Not promoted

ISO 9000:
TOURISM

Limited research Lack of awareness

reject

Few companies registered

Source: Augustyn and Pheby (2000).

Second, there is a general polarisation of views as to the impact of polarisation of

ISO 9000 on business performance, which makes it difficult for those views as to the
within the tourism industry who want to learn more about the standard impact of ISO
and its potential benefits. 9000 on business
There is also one more reason for rejecting ISO 9001 as the branding performance
tool lack of understanding of the standard by the general public
(individual customers). This can probably explain why tourism industry
searches for a new, internationally recognized quality standard that
would be more applicable for the sector and improve its performance
(WTO, 2004).
Since the beginning of 2004, three separate ISO members from
different points of the globe have contacted the ISO Secretary-General
expressing interest in developing International Standards for tourism
services. The areas for work that each has proposed under a new
Technical Committee structure are Eco-tourism, Exhibition terminology
and audit procedures, and Tourism as a whole. (Handszuh, 2004).
It is worth noting that the World Tourism Organization already acts the role of WTO
in a formal liaison organization to ISO/TC 145/SC 1 Public information in promoting
symbols and TC 154 Processes, data elements and documents in commerce, ISO standards in
industry and administration. In addition, other related standards may be tourism
of interest to the World Tourism Organization; one example is ISO/IEC

151
 7501 Identification cards Machine readable travel documents. ISO has
anumber of Technical Committees with work programmes impacting
ontourism (ISO/TC 42 Photography, TC 68 Financial services, ISO/TC
204 Intelligent transport systems, TC 177 Caravans, TC 83 Sports and
recreational equipment, TC 188 Small craft).
tourism standards In 2001 ISO/COPOLCO28 resolved to develop generic guidelines for
on the COPOLCO standardization of services, and to identify consumer priorities in the
forum standardization of two specific areas: financial services and tourism.
Particularly in the area of tourism, preliminary investigations revealed
astrong interest in standardization of tourism services and an abun
dance of existing national standards. COPOLCO agreed that input from
industry operators was necessary in developing feasible proposals for
standardization of tourism services. Further research by COPOLCO
specialists led them to contact representatives from other tourism-
related organizations (e.g. Rainforest Alliance, Swiss Tourism Associa
tion, World Tourism Organization, International Hotel and Restaurant
Association).
Exchange of information between ISO/COPOLCO consumer
representatives and representatives from the hospitality industry has
been fruitful. Input from representatives of the hospitality industry,
notably by a representative of the International Hotel and Restaurant
Association (IH&RA), has helped COPOLCO focus on priority areas of
tourism standardization. In September 2003, COPOLCO identified the
following subjects as both important for consumers and conducive
tostandardization: hygiene, sustainable tourism, safety (particularly
concerning child and fire safety) and accessibility (including design for
all concepts).
More specific to tourism is the proposal for the creation of atechnical
committee that will shortly be circulated to ISO members for vote. The
proposed new field of activity covers terminology and specifications for

28
COPOLCO is the Committee on Consumer Policy of ISO, established in 1978.
It provides a forum for the exchange of information and experience on standards
and conformity assessment issues of interest to consumers, identifies
standardization areas of priority interest to consumers and works to promote and
coordinate consumer representation in those areas. It influences ISOs programme
of work by proposing new areas for standardization where there is a perceived
need for enhanced consumer protection. In response to COPOLCO proposals,
ISO has undertaken standards projects on: customer satisfaction, including
guidance for organizations on how to develop codes of conduct, complaints
handling mechanisms, and external customer dispute resolution systems,
environmental management systems, social responsibility, tourism and related
services, generic guidelines to address the trading of second hand goods, especially
safety, health, environmental protection and product information aspects.

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tourism related services. The aim is to establish criteria that may assist
users and consumers in making informed purchasing decisions in this
important sector and assist providers in implementing good practices as
well as in communicating the services they offer. The work is proposed
to cover a broad range of tourism related areas including: terminology,
accommodations, convention organization, tourist information offices
or sustainable tourism services. Some sub-sectors have already been
identified as being key for this technical committee, such as sustainable
tourism and horizontal aspects already identified by the ISO Committee
on consumer policy as priorities for the users of tourism services.
Arelated, yet narrower field of proposed new work concerns Exhibition
Terminology. This proposed work is currently out for vote by the ISO
membership. The work is intended to develop standardized terminology
that can facilitate objective dialogue with and assessment of exhibition
management services and activities.
The ISO 9000 and ISO 14000 series of standards have been success
fully used in a variety of different service areas, including financial and
tourism services, to improve the overall quality of service delivery.
Actual case examples of hospitality industry providers benefiting from
ISO 9000 and ISO 14000 certification include German tour operators
and fair organizers, hotel and catering associations and hotels in France,
hotels in Singapore and Malaysia, and an airline catering service in
Singapore. The Italian ISO member has published handbooks providing
guidance on implementation of ISO 9000, and later ISO 14000, in the
hotel and tourism sector. Other examples include parks in Italy and
Ecuador, and the administration of island tourist destinations in Italy
and South Korea29. Of the 561 747 organizations certified to ISO 9000
worldwide at the end of 2002, 123 128 were providers of services. Hotels
and restaurants accounted for 1840 of these certifications30.
Beyond the World Tourism Organization, ISOs collaboration with
the United Nations System also extends to many other agencies and
bodies such as the World Trade Organization (observer status); UNIDO;
the International Trade Centre; UNCTAD; ILO; WHO; UN/ECE as
well as other key non-governmental international agencies and organi
zations (e.g. ICC, WBCSD, WEF).
As a worldwide and impartial body, the World Tourism Organization WTO consensus
is currently contemplating to come up with WTO consensus standards standards for the
for the tourism sector. Several intervention areas such social sustain tourism sector
ability and cultural resources, safety and security, or the environment
are being taken into account, to be applied to tourist destinations or
29 ISO Management Systems, ISO 9000 & ISO 14000 News, 19982003.
30 The ISO Survey of ISO 900 and ISO 14001 certificates.

153
 companies. Eventually, WTO might become an accreditation body for
third parties willing to go by its standards at the request of interested
suppliers (second parties). The same way as it applies to certifying other
international standards, the system would be entirely voluntary.

13. Standards as a Communication Tool

Striving for quality in tourism has an intrinsic value. It provides
economic benefits even if it is not automatically accompanied by tourism
growth in numerical terms, it ennobles the tourism environment,
including the social one. It brings better quality of life for all: those who
visit and buy tourism services, those who constitute the tourism environ
ment, and those who are employed by tourism companies and tourism-
supporting infrastructure. So it is worthwhile to invest in quality even if
it does not reap immediate commercial benefits.
the need to However, it is also necessary to be able to communicate quality in the
communicate competitive and rapidly changing world of today in order to win the
quality competition edge and achieve returns from investment in quality.
Quality has to be communicated to potential consumers to reward the
effort.
The annual holiday or even the weekend break is increasingly
associated with enormous financial and emotional risk. In western
society time has become a scarce commodity, particularly for double
income families. Therefore, for many consumers their holiday repre
sents a major emotional investment that cannot easily be replaced if
something goes wrong. Travellers at present can acquire information
from a wide variety of sources. Traditionally touristsexpect this infor
mation, among others, from travel agents. But the Internet the World
Wide Web and browser technology has brought a major change
bothon the quantity of information to which tourists have access and
inthe sophistication with which this information can be manipulated.
tourists need The information technology also facilitates the integration of tourism
for advice information from multiple sources, both local and remote, into perso
and reliable nalised packages and itineraries. Regretfully the information on the
information Internet is badly organised and unstructured. There is an information
overload. And it is time-consuming for a customer to access and assess
the required information and assemble it into a personalised holiday.
Nevertheless research has shown that electronic commerce and the
Internet are rapidly devaluing the traditional roles of travel agents
information delivery and transaction processing. At the same time, the
explosion in available travel information on the Internet has increased

154
the tourists need for advice and critical assessment of product and
destination information, as well as assistance in making a suitable choice
based on a clear understanding of their preferences. As a consequence
the service expected from the travel agent of the future will move more
into assessing the reliability, quality and appropriateness of the retrieved
information, obtained from the Internet and other physical sources
andconveying it, together with appropriate advice, to the customer in
aclearly understandable form. There are also some other factors that
influence expectations (past experiences, other customers opinion, the
promises with booking, the image and the principle of equity etc.).
The process by which customers evaluate a service varies from the
corresponding process used to evaluate goods. As stated before services
are generally seen to be high in experience and credence qualities
whereas goods are high in search qualities. Because of the complexity of
tourism services outlined earlier, experience qualities and to a lesser
degree, credence qualities are particularly relevant features of the
tourism product (or TDA). This feature has implications for the form of
communication which should be adopted by tourism areas and its
agents. The literature suggests that potential customers will be more
influenced by WOM communication and expert comment rather than,
for example, mainstream media advertising (Zeithaml et al., 1993). One
potentially negative feature of this form of communication is the fact
that positive WOM communication can elevate the levels of desired and
predicted service. In turn this may contribute to the development of
gaps where expectations become unrealistic. While management has
control over mainstream advertising, publicity and word of mouth are
blunter instruments. Customers who have enjoyed their visit to a chosen
TDA may be prone to exaggerate aspects of the resort when talking to
friends, thereby increasing the expectations of these groups in the event
that they visit the area. Consumers face risk when making a purchase risk perceived by
decision, due to the uncertainty attached to the outcome of the decision. tourists
The dimensions of perceived risk usually considered are: financial;
performance; physical; social; time; and psychological (Jackoby, Kaplan,
1972). Garner (1986) applies these risks to services (Table XIII).
To minimize these risks, consumers seek to reduce the uncertainty
surrounding the purchase decision (Mangan and Collins, 2002). Different
forms of information can be used by enterprises as risk reducing strategy.
They include the use of brands, symbols, quality levels etc.
According to Handszuh (2004) assuring, symbolizing and identifying possibilities of
quality include the following possibilities: symbolizing
Classification (category, class, grade, rating) which relates quality
basically to physical attributes of the establishment. Attributing an

155
 establishment or service to a certain class does need to automatically
carry the characteristics of quality, although it may give rise to the
expectations of such especially when it comes to a higher class
establishment (e.g. a 5-star hotel).

Table XIII: Types of perceived risk

Risk
Financial The risk that the service purchased will not achieve the best
possible monetary gain for the consumer
Performance The risk that the service purchased will not be completed in the
manner which will result in customer satisfaction.
Physical The risk that the performance of the service will result in
ahealth hazard to the consumer.
Time The risk that the consumer will waste time, lose convenience or
waste effort in getting a service redone.
Social The risk that the selection of the service provider will negatively
affect the perception of other individuals about purchaser.
Psychological The risk that the selection or performance of the producer will
have a negative effect on the consumers peace of mind or self-
perceptions.
Political The risk that some political disturbances will result in a life
(in tourism) hazard to the customer. The type of risk became especially
important after Sept. 11th.
Source: adapted from Garner (1986) and Leidner (2004).

It however appears that classification, whether official or private, is

not sufficient to ensure and communicate quality. The complementary
approach, currently developed and applied in Spain in the hotel sector
for example, is to assign specific quality standards to hotel categories.
Brands (trademarks) can replace classification whereby each
brand may stand for a specific class and include a series of quality
attributes. Accordingly, a brand may be representative of a certain
service idiom and level of quality. Commercial brands are protected by
intellectual property rights.
Nevertheless, even branded companies and facilities are eager to
consolidate their quality idiom by recurring to additional means such
as certification. The case of a well-known Spanish hotel chain, Sol
Meli, can be quoted as an example of this approach.
quality labels in Quality labels A tourism establishment or service may obtain
tourism aquality label or distinction by meeting the standards established by its
own professional or trade organization, or the organization it joins for
this purpose, or an external organization conceding such distinction on
its own right. Many such quality-related labels have been in place for

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many years already, and some enjoy good reputation worldwide. In
addition to suggest quality, they may also stimulate the sector to
promote quality. The national quality labels are just starting in various
places (Spain, Switzerland). Their effectiveness will be checked over
time. Because of the national scale they imply both hopes for large
sector improvements but they also carry great risks in their acceptance
and interpretation.
Certification. Subjecting tourism establishments to certification can certification in
be considered as a new force driving the tourism sector into a higher tourism
level of excellence and competitiveness. Some tourism establishments,
especially hotels, begin to display certification insignia thus alluding to
guarantee quality. This gives rise to questions in both industry and the
public with respect to the actual value of certification for management
and quality assurance.
Four types of certification are in place: system certification, service types of
certification, product certification, and personnel certification. System certification in
certification in tourism may include ISO 9000, ISO 14000, SA 8000, tourism
HACCP, Green Globe, which end result is quality of the organization
against specific criteria. It appears therefore that undergoing this type
of certification does not necessarily promise all quality of service or the
product, but can be useful to correct a number of usual deficiencies
and thus indirectly ensure better quality plus important economic
savings. Some tourism establishments, especially hotels, have begun to
display certification insignia (especially according to ISO 9000/2000
and 14000 family standards) thus alluding to guarantee quality. ISO
standards, so far, refer to management certification to support quality.
Certification does not intervene in the quality level. This is established
by the company itself. It does not even provide for management
excellence. Certification is therefore a starting point of a whole process
aiming at streamlining a companys operations.
The issue is again communication. The user may not know what
certification is up to, but it may be important to make it known because
other commercial partners may so request (e.g. tour operators may ask
for hotel certification) or the company may try to dissipate uncertainty
about its quality status and reputation, or the company believes that it
will enhance its image and competitive advantage vis--vis both users
and other companies. In any case, going by quality parameters and
standards and subjecting tourism establishments to certification can be
considered a new force driving the tourism sector into a higher level of
excellence (Handszuh, 2004).

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 PART FOUR: CONTINUOUS IMPROVEMENT

14. Is It Possible to Measure Service Quality?

Different criteria are used by different customer groups to evaluate
service, and these criteria will vary depending on the situation and the
circumstances. The customer determines specifications, rather than
engineering or others inside the firm. He or she specifies quality, and his
or her satisfaction is the basis for measuring quality performance.
It is the transaction which brings a product with certain characteristics
and capabilities to a customer with certain needs and expectations.
There are five key states which appear in a completed transaction
(Hardie and Walsh, 1994):
1 The actual need of the customer.
2 The perceived requirement to meet the need.
3 The expected performance by the customer.
4 The actual performance of the supplies.
5 The perceived performance of the supplies by the customer.
expected versus The perceived requirement is normally created by the customer as
perceived a requirements specification, but it is sometimes the results of market
performance research by the supplier. The expected performance (prior customer
expectation) is the way in which the customer expects the supplier to
meet the requirement. This depends on the knowledge, attitude and
sense of the customer. A customer may be unaware of the current
capability of the service enterprise, and have very low expectations. Or
the customer may have unreasonable ideas of what is possible, far
beyond the capacity of the supplier. In this case, the customer will
always be dissatisfied. Ideally, the customers expectations should be
based on a good understanding of the capability of current technology
and the service industry.
factors influencing Prior customer expectation is the a priori image of what will be recei
customers ved when the consumer purchases a service. Several factors influence
apriori image the a priori image. These include: personal needs; past experience;
word of mouth; market communications; image; and price. The provider
of service can be proactive in shaping the customers expectations
through its marketing and external communication efforts. Other factors
that influence expectations are past experiences, the customers self-
perceived competency, the service of other providers from whom the
customer can obtain service, what customers hear from other customers,
external communications from the service provider which include a wide

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variety of direct and indirect messages converged by service firms to
customers, the promises with booking, the image and the principle of
equity (Hjalager, 2001).
The actual quality (performance is the true nature of the supplies the real level of
the actual capability of the supplies, and the actual performance of service quality
anyservices. Actual quality is the real level of service quality
provided. This is determined and controlled by the service provider. It
is possible to quantify and set standards for some, if not all, of the
service quality characteristics. It is, however, imperative to note that
the quality of a service is determined by the customers perception
and not by the perceptions of the providers of the service (Boothe, 1990,
Grnroos, 1978).
The perceived quality is the understanding which the customer
develops of how the supplies will perform. Perceived quality (PQ) is possible quality
the customers feel for the quality of the service. The three key outcomes
possible quality outcomes are:
1. satisfactory quality, where customers expectations (CE) are exactly
met: that is to say, CE = PQ;
2. ideal quality, where perceived quality is higher than customers
expectations: that is to say, PQ > CE;
3. unacceptable quality, where perceived quality is lower thancustomers
expectations: that is to say, PQ < CE.
The provider of the service should ensure that either condition (1) or
condition (2) is attained each time the service is delivered. It is not
practical to focus on the points that may lie in between these three
landmarks on the quality continuum. The service providers are more
likely to reach conditions (1) and (2) if they have a clear understanding
of the customers expected quality. Moreover, to be competitive it is
necessary to set marginally higher levels of satisfactory and ideal
quality than those of competitors. This will require an understanding of
the generic determinants of service quality.
The perceived quality lies along a continuum. Unacceptable perceived quality
quality lies at one end of this continuum, while ideal quality lies at paradigm
the other end. The points in between represent different gradations
ofquality (Ghobadian et al., 1994). The perceived quality can be
represented as follows:
Prior Customer Expectations + Actual Process Quality + Actual Outcome Quality = Perceived Quality
PCE + APQ + AOQ = PQ

This paradigm implies that prior expectations are compared with

the actual service delivery process and the service outcome and that
it is through this comparison that the perceived quality is fashioned.

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 Service quality is usually discussed in terms of different dimensions
of the service production process. Grnroos (1978) argued that service
quality comprises of three dimensions. These are: the technical (physi
cal) quality of outcome, the functional (interactive) quality of the service
encounter, the corporate image.
physical quality Physical quality represents the quality derived from the physical
elements of the service. In tourism this will include both the physical
product, for example, food and drinks in the restaurants and bars and
the framework of physical support that facilitates production of the
service. The latter can be subdivided into environmental factors such as
buildings, swimming pools, tennis courts, promenades, beaches etc., and
equipment (in the hotel, restaurant etc.). The aesthetic appeal of the
facility architecture may be the basis of a customers first impression
ofthe quality of the service provider. The physical elements lay the
interactive quality foundation for the second dimension, interactive quality. This element
of quality is concerned with the interaction between the provider and
recipient of a service and is often perceived in a subjective manner.
These elements may be human or mechanical, as in the case of an ATM
or drinks dispenser. Interactions between different groups of customers
would also be an important feature of interactive quality. The third
corporate quality dimension, corporate quality, is concerned with consumers perceptions
of the service organization (price; external communications; physical
location; appearance of the site; and the competence and behaviour of
service firms employees). Moreover, in services, customer interaction,
along with word-of-mouth communication, influence perceptions of
corporate image more than the traditional marketing elements. Corpo
rate quality is symbolic in nature and involves customer perceptions of
the corporate entity.
Grnroos states that technical quality refers to the result of the
service and/or the question: What has been provided?. Functional
quality refers to the way the service has been delivered and relates to
the question: How has the service been provided?. Technical solutions
are easily copied. Functional quality, in contrast, can be used to create
acompetitive edge by focusing on staff-customer relations. This refers
to the more personal side of service and how personnel interact with
customers. Technical quality is a necessary but not sufficient condition
for high quality service. Functional quality, on the other hand, is likely
to be more important than technical quality if the latter is at least of
asufficient standard.
An alternative, yet complementary, approach to quality merely utili
ses two dimensions, process quality and output quality of service produc
process quality tion (Lethinen and Lethinen, 1992). Process quality is the customers

160
subjective judgment and draws upon their view of the productionprocess
and from feelings of how well they fit into it. Customers participate in
the production process to varying degrees, although in the tourism
context there are many cases of heavy participation.
Output quality represents the customers evaluation of the service output quality
production process. This can include both tangible and intangible
elements, although the output of tourism is often intangible, as represen
ted by personal feelings and experiences. The use of physical evidence
cues during and on completion of the process may mitigate some of
theproblems that this causes, for example, a certificate at the end of
acoaching course to indicate a particular level of achievement. It should
be noted that the output of the service may well be influenced by
elements of the process and that these two dimensions are not mutually
exclusive.
Communicating service quality begins with an understanding of
theaspects of service quality that are most important to customers
(Zeithaml et al., 1990). Accordingly, it seems necessary to list service
attributes essential in assessing the service quality. Quality in different
service areas is considered in different ways see the example in Table
XIV.

Table XIV: Quality in different areas of society

Area Examples
Airlines On-time, comfortable, low-cost service
Health Care Correct diagnosis, minimum wait time, lower cost, security
Food Services Good product, fast delivery, good environment
Postal Services Fast delivery, correct delivery, cost containment
Academia Proper preparation for future, on-time knowledge delivery
Consumer Products Properly made, defect-free, cost effective
Insurance Payoff on time, reasonable cost
Military Rapid deployment, decreased wages, no graft
Automotive Defect-free
Communications Clearer, faster, cheaper service
Source: http://home.t-online

Consumers take into account several factors, not just one, when factors influencing
deciding about quality. Four primary factors have been identified as customer
influencing customer perceptions of service: service encounters or perceptions of
moments of truth, the evidence of service, image and price. These service
form the customers overall perceptions of quality, satisfaction and
value.

161
 1. In service encounters. Verbal and non- verbal behaviour are as impor
tant determinants of quality as tangible cues such as the equipment
and physical setting.
2. Evidence of service. Due to the intangibility of services and the
simultaneity of production and consumption, customers are searching
for cues to help them determine the level of service. Three major
categories of evidence have been identified:
employees how they are dressed, their personal appearance and
their attitude and behaviour;
process whether the service is complex, bureaucratic; and
physical evidence all the tangible aspects of the service such as
reports, equipment, statements, and in some cases the physical
facility where the service is offered (the branch).
3. Image and reputation. The set of perceptions reflected in the associa
tions held in the memory of the consumer. These can be specific (e.g.
hours of operation, ease of access), or, of an intangible nature
(e.g.trustworthiness, tradition, reliability). A favourable mage can
influence positively perceptions of quality, value and satisfaction
4. Price. If the price is high, customers are likely to expect high quality,
and their actual perceptions will be influenced accordingly. If the
price is too low, customers might have doubts about both the ability
of the institution to deliver quality and about the actual level of
service received.
SERVQUAL The most widely reported framework is that proposed by Para
dimensions suraman et al. (1988) as the basis of SERVQUAL research, consisting
of the five dimensions of service quality tangibles, reliability, responsi
veness, assurance and empathy. Five quality determinants enumerated
by Parasuraman were a consolidation of ten dimensions as shown in
Table XV.

Table XV: SERVQUAL Dimensions

SERVQUAL Components
Tangibles Tangibles
Reliability Reliability
Responsiveness Responsiveness
Assurance Competence
Courtesy
Credibility
Security
Empathy Access
Communication
Understanding

Source: Dotchin and Oakland (1994b).

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 The full list provides the most complete expression yet available of
the issues which influence consumers in their assessment of service
quality. Only two of these determinants, tangibles and credibility, can be
evaluated by the consumer in advance of the service performance. Two
others, competence and security, cannot be evaluated at all, even after
the service is consumed. For the remainder, evaluation is possible, but example
only during the service process itself. Below see the description of the service quality
example service quality determinants: determinants
Reliability: the ability to provide the pledged service on time,
accurately and dependably. as well as prompt settlement of the claim.
Responsiveness: the ability to deal effectively with complaints and
promptness of the service. For example, in the case of a package tour
operator, it could be dealing quickly and effectively with a patrons
accommodation problems; or in the case of a car hire company, provi
ding a similar or higher-grade substitute car, even when the original car
suffers from only a minor problem such as a radio malfunction.
Customization: the willingness and ability to adjust the service to
meet the needs of the customer. This would mean, for example, in the
case of a gourmet restaurant, willingness to provide an item that is not
on the menu; or in the case of a specialized tour operator, tailoring the
holiday package to meet the customers specific requirements.
Credibility: the extent to which the service is believed and trusted.
The service providers name and reputation, and the personal traits of
front line staff all contribute to credibility.
Competence: staff should possess the necessary skill, knowledge and
information to perform the service effectively.
Access: the ease of approachability and contact. For example, this
could involve convenient opening hours, getting through on the tele
phone and convenient location.
Courtesy: the politeness, respect, consideration and friendliness
shown to the customers by the contact personnel.
Security: the freedom from danger, risk and doubt. It involves
physical safety, financial security and confidentiality.
Communication: keeping customers informed about the service in
alanguage that they can understand and listening to the customers. For
example, in the case of an airline giving regular updates, this could
include detailed and accurate information whenever a delay in service
occurs.
Tangibles: these include: the state of facilitating goods; physical con
dition of the buildings and the environment; appearance of personnel;
and condition of equipment. Tangibles are especially important in high-
contact services.

163
 Understanding/knowing the customer: this involves trying to under
stand the customers needs and specific requirements; providing
individualized attention; and recognizing the regular customer an
important determinant of quality in high-contact customized services.
quality gap Parasuraman et al. (1988) propose a model of the determinants of
analysis model service quality (Figure XXIV) which identifies five opportunities for
quality failure to arise (service gaps).

Figure XXIV: Quality Gap Analysis Model

Consumer
Word of mouth Past experience
communication Personal needs

Expected services

Gap 5

Perceived services

Marketer
Service delivery Gap External
(including pre- and 4 communications
post-contacts) to consumers
Gap 3
Translation of
perceptions into
Gap 1 service quality
specifications
Gap 2
Management
perception of
consumer
expectations

Source: Dotchin and Oakland (1994b).

The model was based on information collected from in-depth inter

views with executives, and focus group interviews with consumers
inretail banking, credit card, securities brokerage and product repair
and maintenance. From this work it was possible to identify a number
of differences between the consumers requirement, or expectation, of
aparticular aspect of a stage in the marketing and provision of
aservice, and their perception of the execution of the same stage.
The quality gap model attempts to show the salient activities of the
service organization that influence the perception of quality. Moreover,
the model shows the interaction between these activities and identifies

164
the linkages between the key activities of the service organization or
marketer which are pertinent to the delivery of a satisfactory level of
service quality. The gaps are described briefly below. quality gaps
Consumer expectation management perception gap (Gap 1): Mana
gement may have inaccurate perceptions of what consumers(actually) perception gap
expect. The reason for this gap is lack of proper market/customer
focus. The presence of a marketing department does not automati
cally guarantee market focus. It requires the appropriate manage
ment processes, market analysis tools and attitude.
Service quality specification gap (Gap 2): There may be an inability
on the part of the management to translate customer expectations
into service quality specifications. This gap relates to aspects of quality
service design. For example, an airline may find that its customers specification gap
require a better meals service on its short-haul routes. This require
ment needs to be translated into food and beverage menus for
different times of the day.
Service delivery gap (Gap 3): Guidelines for service delivery do not
guarantee high-quality service delivery or performance. There are service delivery
several reasons for this. These include: lack of sufficient support for gap
the frontline staff, process problems, or frontline/contact staff perfor
mance variability. For instance, the airline of the previous example
may introduce an exotic and extensive menu that does not leave
enough time to serve or consume. This results in a perception of poor
quality. The manner of service also influences the perception of
quality. If the stewards or stewardesses are not competent or friendly,
once again the investment in the meal service will not improve
perceptions of quality.
External communication gap (Gap 4): Consumer expectations are external
fashioned by the external communications of an organization. communication
Arealistic expectation will normally promote a more positive percep gap
tion of service quality. A service organization must ensure that its
marketing and promotion material accurately describes the service
offering and the way it is delivered. This is why in service organiza
tions it is counter-productive to separate the operations and the
marketing functions.
Expected service perceived service gap (Gap 5): Perceived quality expected versus
of service depends on the size and direction of Gap 5, which in turn perceived service
depends on the nature of the gaps associated with marketing, design gap
and delivery of services.
The above model is a diagnostic tool. If used properly, it will enable
the management to identify systematically service quality shortfalls.
This model is externally focused. It has the potential to assist the

165
 SERVQUAL as management to identify the pertinent service quality factors from the
adiagnostic tool perspective of the customer. SERVQUAL model can be perceived as
aprocess for the design of a service: management develop an under
standing of customer expectations, use this to set up relevant quality
specifications, ensure that the service is designed and operated to those
specifications, and ensure that customers are correctly informed of the
service standards. It also provides a framework for analyzing quality
failures by identifying the gaps in this process which cause a mismatch
between customer expectation and customer experience (perceived
service). Since this is a general model of the service process it does not
suffer from the problems of defining and measuring service quality and
does not require a rigorous definition of service quality to enable it to
be used.
design quality Accurate perceptions of customer expectations are necessary, but
not sufficient, for delivering correct quality service. Another prere
quisite is the development of a service design or concept and perfor
mance standards that reflect those accurate perceptions. It is called
design quality. Improving design quality sometimes means more than
modifying the existing concept or design. Sometimes a fundamental
change is needed, involving a creative, innovative approach, leading to
a completely new service design or concept that tries to meet particular
customer needs that were not fulfilled before in a satisfactory way by
any other organisation.
developing A powerful method for both strategies is customer surveying (loyal,
astrategy of QM repeat, first time and lost customers). This is a very good starting point
for developing a strategy of quality management, because it draws the
attention of all persons involved to the customer. Client orientation is
essential in improving and innovating services. Moreover, the results
ofa survey confront all employees of a company with facts they did
notknow before, e.g. differences between the service expectations
expressed by the customers and the supposed expectations. A survey of
customers can be also a powerful information source for improvement
and innovation (Fache, 2000).
Conceptual service quality models are useful for a number of
reasons. First, they provide an overview of factors that affect the quality
of the organization and its offerings. Second, they facilitate under
standing. Third, they help to clarify how quality shortfalls develop.
Fourth, they can provide a framework for launching quality improve
ment programmes. A framework has the advantage of channelling the
efforts of the organization in the appropriate direction.
It is also important to be aware of the limitation of any model.
Models are almost invariably simplified versions of reality. They

166
suggest that there are simple relationships between complex phenome
non, and that systems operate by rules of cause and effect. However in
any case they prove that human behaviour significantly affects the
quality of an organization and its offerings.

15. Cost of Quality

15.1. The Money in Mistakes

Quality experts argue that a typical company can save more money by
halving poor quality costs than by doubling sales (Harrington 1987). The
implementation of a quality program can result in substantial cost
savings and higher revenues for an organization. Corporations like
Xerox, General Electric, and Motorola have implemented successful
quality programs and have reduced their quality costs from 30 percent
of sales to 2 percent of sales while improving the quality of their
products (Superville and Gupta, 2001). But a survey of mid-size manufac
turing firms reveals that only one-third of the respondents calculated
quality costs (Morse, 1991). What is even more surprising only one in
four finalists of the prestigious Malcolm Baldrige National Quality
Award calculated their quality costs (Baatz, 1992).
The activities that people used to deal with problems of quality most
of the time include (Witcher, 1990):
correcting errors e.g. misspelled written material,
finding out where things are e.g. missing files,
finding why things are late e.g. stock shortages,
checking things we do not trust e.g. double checking research
results,
rectifying and reworking e.g. modifying designs which are too
difficult to produce,
apologizing to customers e.g. finding and explaining to them,
clearing up e.g. scrap, returns,
making good e.g. warranty claims, service.
Companies used to detect defects and errors in their products and the economic
services and then congratulate themselves on taking remedial action to sense of errors
put them right. They continue fire-fighting and rectifying the same detection
problems desperately week after week, month after month, and year
after year! (Hakes, 1991). It is obvious that employing more inspectors,
tightening up standards, developing correction, repair and rework
teams, will not promote quality. Nevertheless, these activities still exist
in today's industry (Oakland, 1989).

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 poor quality costs Poor quality costs your organization money. Good quality saves your
money! organization money. But many organizations today do not measure the
cost of poor quality, and if you do not measure it, you cannot control it.
In Harringtons poor quality concept there is an item called indirect
poor-quality cost which includes: customer-incurred cost, customer-
dissatisfaction cost, loss-of-reputation cost, lost-opportunity cost
(Harrington, 1999).
customer-incurred Customer-incurred cost appears when an output fails to meet the
cost customers expectations. Typical customer-incurred PQC are:
Loss of productivity while equipment is down.
Travel costs and time spent to return defective merchandise or to
make complaint.
Overtime to make up production because equipment is down.
Repair costs after warranty period is over.
Backup equipment needed when regular equipment fails.
It is also necessary to apply poor-quality cost systems to the impact
that errors have on the customer. Frequently, the cost incurred by the
customer when an error occurs can far exceed the cost of repairing the
defective item.
customer Customer-dissatisfaction cost - Figure XXV portrays customer-
dissatisfaction dissatisfaction PQC in terms of lost revenue versus product quality level.
cost On the left side of the curve, you will note a sharp decrease in lost
revenue for only small improvements in product quality. This curve

Figure XXV: Changes in customer-dissatisfaction costs

High

New customer
dissatisfaction
Lost revenue (dollars)

quality costs

Product
Old customer operating
dissatisfaction level
quality costs

Low
Bad Product quality level Best
Source: Harrington (1999).

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reflects the binary classification of satisfaction in the customers mind.
Once a customers acceptance level has been reached, the curve
becomes almost flat, even though the product quality level continues to
improve (Harrington, 1999).
Loss-of-reputation cost is even more difficult to measure and predict. loss-of-reputation
Costs incurred due to loss of reputation differ from customer- cost
dissatisfaction costs in that they reflect the customers attitude toward
an organization rather than toward an individual service or product line.
The cost must be considered as a total effect for an organization. It is
for this very reason that it is considered good business practice to group
and distribute products under different trade names based on expected
performance.
Lost-opportunity cost relates to the money that the organization lost-opportunity
does not realize, due to poor judgment or poor output that results in the cost
organization not taking advantage of an opportunity. Every customer
that turns away from your products represents a lost- opportunity cost.
It is very important to understand and consider the losses involved when
we lose a customer (Harrington, 1999).
Poor-quality cost provides a very useful tool to change the way the way we think
management and employees think about errors. PQC helps by: about errors
Getting management attention talking to management in dollars
provides them with information that they can relate to. It takes
quality out of the abstract.
Changing the way the employee thinks about errors employees
need to understand the cost of errors they make.
Providing a means to measure the true impact of corrective action
and changes made to improve the process.
Providing a simple, understandable method of measuring what effect
poor quality has on the organization.
Measuring and reporting the COQ is the first step in a quality reporting COQ
management program. It helps management understand the magnitude as a step towards
of the quality problem, pinpoints opportunities for improvement, and QM
measures the progress being made by the improvement activities. COQ
information can be used to indicate major opportunities for corrective
action and to provide incentives for quality improvement. In course of
detecting and reduction of poor quality costs, the overall cost of quality
gets down and the relations between the level of different cost items will
significantly change (see figure XXVI).
Feigenbaum (1974) claimed that failure costs tend to fall, as appraisal
costs rise. An empirical study (Ittner, 1996) indicated that effective
prevention investments could reduce both appraisal and failure costs.
Figure XXVII presents the optimum shares of particular COQ items.

169
Figure XXVI: Reduction and shares of different COQ items.

COST COST OF QUALITY

External Reduction in
Failure External
Failure External Cost of Quality
Failure = Savings
Internal Internal
Internal Failure
Failure Failure

Appraisal
Appraisal
Appraisal

Prevention
Prevention
Prevention

TIME
Source: Miller (1999b).

Figure XXVII: Cost of Quality (from typical costs to optimum)

From To
Appraisal Prevention
15.0% Prevention
5.0% 45.0%

External Internal
Failure Failure
35.0% 20.0%

Internal Failure Appraisal External Failure

45.0% 25.0% 10.0%

Typical Costs Optimum

Source: Miller (1999b).

It is worth mentioning that quality levels exist in all departments and

functions, not just in activities directly related to the product. Deming is
credited for saying that 80 per cent of quality problems is the result of
people who never touch the product. For example, the number of times
we incorrectly issue or re-issue an invoice, re-design something because
the initial design was incorrect, re-write or re-type letters are the result
of poor quality and incur a cost of quality.

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15.2. Cost of Quality (COQ) Models
Among the most common barriers to implementing a TQM programme barriers to TQM
managers regard lack of resources, short-term goals, internal environ implementation
ment and communication as principal boundaries to TQM programmes.
This is evidence of a market-place in which management and staff are
under increasing pressure to achieve quick profits and higher volume
ofsale. In fact some companies are adopting quality initiatives
towardscutting costs and achieving short-term results rather than being
committed to the never-ending improvement culture which quality
management programmes should promote.
As mentioned earlier the most popular approach to the cost of
quality is to understand them as cost of poor quality those associated
with avoiding poor quality and those that occur as its result. Although
the concept of cost of quality has been in existence since the early 1940s,
it was not until the early 1960s that a formal attempt was made to model
COQ. Juran (1962) proposed a division of quality costs into four
categories: prevention, appraisal, internal failure, and external failure
costs.
Prevention costs are those that are expanded in order to prevent prevention costs
nonconforming products from occurring and reaching the customer.
Prevention reflects the up-front investment of time and effort to prevent
a problem from occurring the first time (costs incurred in an effort to
prevent defects from occurring). Product design and product reviews,
employee training, preventive maintenance and quality improvement
programs are examples of prevention costs.
Appraisal costs are those expanded on maintaining quality levels appraisal costs
through measurement and analysis of data in an effort to detect and
correct occurring problems. Appraisal costs are also the costs incurred
in identifying which individual products do not conform to specifica
tions. Accounts in this category are all about what we do to prevent
orminimise the need for appraisal and to minimise or eliminate internal
and external failures. Appraisal includes the activities the customer
should not be expected to pay for (sampling, testing, checking, inspect
ing or auditing).
The two kinds of failure costs are a result of nonconformance; internal and
unsatisfactory quality can be found either before (internal failure costs) external failure
of after (external failure costs) the delivery of a product to the custo costs
mer(Miller, 1999b). Internal failure cost is a result of quality failures
withinthe company. These costs occur prior to delivery or shipment of
aproduct or service and are incurred when a nonconforming product
isdetected within a factory/organization. Scrap costs, rework costs,

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 reinspection costs, cost of downtime due to defective parts, are exam
ples of internal failure costs. They include non-value adding activities,
costs associated with opportunities to improve process costs.
External failure is cost resulting from products or services not
conforming to customer requirements. They are the costs incurred when
a nonconforming product is detected after it is shipped to the customer.
Costs of recalls, warranties and customer complaints are examples of
external failure costs.
There are some other costs including industry-specific quality costs
(Heldt, 1994), costs of exceeding requirements and lost opportunity
costs (Collins, 1995). However some researchers insist that these pro
posed costs of quality, upon closer inspection, can be incorporated into
hidden internal and/or external failure costs.
reactive cost Another COQ model is developed to include two major costelements.
One is termed reactive cost, which accounts for quality related costs
incurred at a given stable level of operation. These include the process
monitoring cost; product inspection cost and the loss due to deviation
form the part design target and delivery schedule. The second element
considers the cost of attaining an improved level of conformance and
proactive cost hence is termed proactive cost. This element accounts for the cost of
introducing planned changes to the process as part of continuing efforts
to improve its conformance. More specifically the improvement costs can
be defined as the total costs incurred through:
identifying new target values to better achieve customer expecta
tions;
reduce deviation between the current process average and the
specified target; and
reduce variation in the process output.
Using incremental economics the two cost functions should be
assembled to obtain the net worth of any improvement. To ensure that
higher conformance should cost less, an economic criterion is used to
restrict the net worth of improvement within positive boundaries.
prices of Similarly Crosby (1984) divides quality costs into two categories:
conformance and 1. the price of conformance (POC), including the explicitly quality-
non-conformance related costs incurred in making certain that things are done right
the first time; and
2. the price of nonconformance (PNOC), including all the costs
incurred because quality is not right the first time.
Jurans COQ Jurans COQ model suggests that as quality improves, conformance
model costs (prevention and appraisal costs) increase but nonconformance
costs (internal and external failure costs) decrease (Figure XXVIII).
Total cost of quality is determined by adding conformance and non

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conformance costs. Juran suggests that the objective of any quality
program should be to find the level of quality (defect rate) that
minimizes the total cost of quality i.e. the bottom of the U-shaped total
quality cost curve.

Figure XXVIII: Jurans COQ model

Total Qality Cost

Quality Cost

Nonconformance Costs

Conformance Costs

0% Conformance % 100%
Source: Juran (1962).

Jurans COQ model proposes that the optimal level of quality is

achieved at less than 100 percent conformance, i.e. at a level where
some defective products are being produced. Initial dollars spent on
quality costs pay handsome rewards in terms of increased productivity
and improved customer satisfaction. After a certain point, however,
additional dollars spent on quality costs do not result in proportionate
savings to the organization. Increased voluntary spending on confor
mance costs results in a lower defect rate (ahigher conformance level)
and in turn, lower nonconformance costs. The increasingly steeper
conformance cost curve is a reflection of the law of diminishing marginal
returns relative to the level of defects (Diallo et al., 1995).
Empirical analysis reveals that for every eight cents spent on preven
tion costs, an organization can save one dollar in failure costs (Superville
and Gupta, 2001). Money spent on corrective action (prevention and
appraisal costs) is generally a one-time cost for most organizations
aimed at eliminating the root cause of the quality problem. The longer
the quality problem remains unresolved, the higher the failure costs.
Failure costs that typically arise as a result of inadequate spending on
prevention costs are warranty costs, product returns, product liabilities.

173
 And these are only the tangible costs that are immediately apparent.
Organizations may also have intangible costs such as lost contribution
margins from lost sales due to poor product quality, loss of customer
goodwill, and lost market share (Superville and Gupta, 2001).
emphasis on Appraisal costs, with emphasis on early detection, is the next best
appraisal costs alternative and should experience the next greatest percentage of quality
dollars. The remaining category, failure costs (both internal and exter
nal) should ideally constitute only a minor percentage of the total
dollars spent on quality.

15.3. Approaches to Quality Cost Measurement

the lack of COQ Traditional cost accounting, whose main functions are inventory valua
information tion and income determination for external financial reporting, does
notyield the COQ information needed. While most COQ measure
mentmethods are activity/process oriented, traditional cost accounting
establishes cost accounts by the categories of expenses, instead of
activities. Under traditional cost accounting, many COQ-related costs
are lumped into overheads, which are allocated to cost centres (usually
departments) and then to products through predetermined overhead
rates. For example, among various COQ-related costs, the rework and
the unrecovered cost of spoiled goods caused by internal failures are
charged to the factory overhead control account which accumulates the
actual overhead costs incurred (Hammer, Carter, Usry, 1993). The
predetermined overhead rates should be adjusted to incorporate the
normal levels of various COQ-related costs, and excess COQ-related
costs will be buried in overhead variances (Tsa, 1998).
prevention- Oakland (1993) remarked that quality related costs should be
appraisal-failure collected and reported separately and not absorbed into a variety of
(PAF) approach overheads. Prevention-appraisal-failure (PAF) approach and process
cost approach are two main approaches to measuring COQ. However,
these approaches still cannot provide appropriate methods to include
overhead costs in COQ systems. Accordingly, many quality cost
elements require estimates.
After Feigenbaum (1986) categorized quality costs into prevention-
appraisal-failure (PAF), the PAF scheme has been almost universally
accepted for quality costing. In order to calculate total quality cost,
thequality cost elements should be identified under the categories of
prevention, appraisal, internal failure and external failure costs.
disadvantages of Although the PAF) model is universally accepted for quality costing,
the PAF model there are a number of criticisms of it (Oakland, 1993, Porter and
Rayner, 1992), described as follows:

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 It is difficult to decide which activities stand for prevention of quality
failures since almost everything a well-managed company does has
something to do with preventing quality problems.
There are a range of prevention activities in any company which are
integral to ensuring quality but may never be included in the report
of quality costs.
Practical experience indicates that firms which have achieved notable
reductions in quality costs do not always seem to have greatly increa
sed their expenditure on prevention.
Original PAF model does not include intangible quality costs such as
loss of customer goodwill and loss of sales,
It is sometimes difficult to uniquely classify costs (e.g. design reviews)
into prevention, appraisal, internal failure, or external failure costs.
The PAF) model focuses attention on cost reduction and ignores the
positive contribution to price and sales volume by improved quality.
As mentioned above, the classic view of an optimal quality level is
not in accordance with the continuous quality improvement philo
sophy of TQM.
The key focus of TQM is on process improvement, while the PAF
categorization scheme does not consider process costs. Therefore,
the PAF model is of limited use in a TQM program.
The alternatives to the PAF categorization scheme are divisions of
quality costs into conformance and nonconformance, tangible and intan
gible, controllable and uncontrollable, discretionary and consequential
costs, and so on.
In Xerox, quality costs are classified into three categories (Carr,
1992):
1. the cost of conformance (prevention and appraisal);
2. the cost of nonconformance (failure to meet customer requirements
before and after delivery); and
3. the cost of lost opportunities.
The first two categories are analogous to Crosbys price of confor
mance and price of non-conformance respectively. Xerox measures lost
opportunities as the profit impact of lost revenues. It occurs when
acustomer chooses a competitive product over a Xerox product, when
acustomer cancels an order because of inadequate service, or when
acustomer buys Xerox equipment that is inadequate or unnecessary and
switches to another brand.
It seems that the identification of quality cost elements in the PAF identification
approach) is somewhat arbitrary. It may focus on some quality-related of quality cost
activities which account for the significant part of total quality cost, not elements
on all the interrelated activities in a process. Under the philosophy of

175
 process improvement in TQM, analysts should place emphasis on the
cost of each process rather than an arbitrarily defined cost of quality
process cost (Goulden and Rawlins, 1985). In view of this, the process cost approach
approach is proposed. It recognizes the importance of process cost measurement
and ownership. The process cost is the total of the cost of conformance
(COC) and the cost of nonconformance (CONC) for a particular
process. The COC is the actual process cost of providing products or
services to the required standards, first time and every time, by a given
specified process. The CONC is the failure cost associated with aprocess
not being operated to the required standard (Porter and Rayner, 1992).
The process cost model can be developed for any process within an
organization. It will identify all the activities and parameters within the
process to be monitored by flowcharting the process. Then, the flow
charted activities are allocated as COC or CONC, and the cost of quality
at each stage (i.e. COC + CONC) are calculated or estimated. Finally,
key areas for process improvement are identified and improved by
investing in prevention activities and process redesign to reduce the
CONC and the excessive COC respectively (Oakland, 1993, Porter and
Rayner, 1992).

15.4. Cost-tracing Management

The management of quality from the economic viewpoint, made quality
managers aware that they are actually managing the function of produc
tivity and business assurance as well as that of quality. As many as
80per cent of organizations implementing TQM are failing to show any
tangible benefits. This is generating a backlash against TQM, with many
observers not only pronouncing its impending doom, but advocating
newer management philosophies. Fundamental to TQM is the conti
nuous improvement of business processes. This involves a substantial
cost. There is therefore a need for senior management to demonstrate
an improvement in business performance to justify the change. And
there is a problem here.
benefits of COQ COQ programmes can be used to identify, prioritize, evaluate, and
programmes select quality investments, monitor improvements over time, and
increase sales while reducing costs, capture top managements attention
for quality programs, challenge the necessity for commonly-accepted
operating expenses, measure the return on quality investments, and
jumpstart other quality improvement efforts. There is however one
barrier to COQ implementation errors in data collection can distort
the cost of quality and lead to inappropriate management decisions. In
order to overcome this barrier COQ implementation must go smoothly

176
with clear communication. First, a general amnesty for initial quality
cost measurements, along with assurance that these measurements will
not be used to cut the workforce, will encourage honest reporting.
Second, a long-term focus on improving business processes with the goal
of 100 per cent customer satisfaction will ensure that COQ figures are
not used for budgeting purposes, or to indicate short-term financial
performance. Third, use of readily available information utilizing diffe
rent measures from different organizational levels will enable COQ
implementation teams to estimate hidden costs, rather than striving
forexact quality related numbers. Finally, communication of COQ to
management in terms of quality costs as a percentage of sales, or
alternatively as compared to profits, will serve to sustain their interest in
quality investment programs (Angel and Chandr, 2001).
Quality investment decisions are complex and interrelated, with
added uncertainties associated with the many unknown and unknow
able costs (such as the value of an unhappy customer). The nature of
quality costs is different in case of service and manufacturing organiza
tions; in manufacturing they are primarily product oriented, whereas for
services they are generally labour dependent. Since quality in service
organizations strongly depends on interaction between employee and
customer, costs that tend to account for a higher percentage of total
quality than they do in manufacturing, are appraisal costs. Internal
failure costs, however, tend to be much lower for service organizations,
since there is little or no opportunity to correct an error before it
reaches the customer and by the time it becomes an external failure.
Work measurement and sampling techniques are often used extensi
vely to gather quality costs in service organizations. For example, work
measurement can be used to determine how much time an employee
spends on various quality-related activities. The proportion of time
multiplied by the individuals salary represents an estimate of the quality
cost for that activity. Other ways of determining quality costs for services
are customer surveys and all different means of customer feedback. All
in all, however, the intangible character of the output of services makes
quality cost accounting for this sector very difficult.
Quality costs analysis can not be taken separately for different groups
of costs as it may lead to mistaken conclusions and decisions. E.g.
agreat proportion of operating costs in activities of service organizations
is attributed to people. Therefore, a reduction in total quality costs
frequently means a reduction in time worked and hence in personnel. In
many labour-intensive services (like tourism or hospitality) such decision
might result in a sudden quality decrease and cause the yoyo effect
through its influence on strong increase in external failure costs and

177
 additional immeasurable loses (weakened companys image, negative
WOM). Again the idea of systems thinking should be accepted here to
make the proper decision about the quality costs management.
If we measure what we do then we can set priorities, which can be
directly related to both internal and external customer satisfaction;
priorities that, acted upon, can reduce cost that the customer should not
be expected to pay. Without appropriate measures and data we try to
address many issues rather than concentrate on the vital few that will
have a major impact on how we work and what we deliver to improve
customer satisfaction. Undoubtedly, those who have invested in TQM
or who are preparing to invest in TQM as a quality model for restruc
turing will need to ask themselves two important questions:
What is my return on quality (ROQ)?
How to demonstrate the return on quality investments?
The answer lies in measurement. This involves assessing customer
need and expectations; producing quality outputs which meet or exceed
customer satisfaction, and then documenting these returns by directly
linking quality education outputs with the inputs of time, money, and
effort (Weller, 1996). Consequently, accountability means demonstrating
quality returns on quality investments with products and services provi
ded more efficiently and effectively to satisfy customer demands and
meet their expectations.
The problem of cost measuring and quantifying the quality program
mes is of special concern not only to profit-oriented enterprises but any
other organizations as well (public schools, hospitals etc.). Without the
ability to demonstrate quality returns for quality investments, be it time,
money, or technology, public support may wane and the progress gained
by the TQM practices may be perceived as too expensive for public
relations between support (Weller, 1996). If we manage to put the quality function on
the value of equal terms with organizational counterparts (sales, marketing, finance
quality and COQ department), the quality economics principle is used. This principle
establishes the relationship between the value of quality and the cost of
quality, as graphically presented in Figure XXIX.
quality economics We always strive to increase the level of quality, while at the same
time decrease the COQ. The minimum point in the COQ curve is
reached when the sum of the costs of prevention, appraisal and non-
conformances is at its minimal/optimal value.
The value of quality is defined as an index of consumer taste. The
value of quality is the price that the consumer is willing to invest in
return for a level of quality that meets his/her expectations. The value of
quality curve, has no optimum point, but rather a final maximum value,
which is reached asymptotically. The intersection of these two curves is

178
the optimum working area for the realization of maximum economic
benefits from the quality management.

Figure XXIX: Quality economics

COST
$

ITY
UAL
FQ
TO
COS
VALUE OF QUALITY

ION
ENT COST
F PREV ISAL OF FA
ILURE
TO RA
COS ND APP
A QUALITY
UNDER QUALITY OPTIMUM QUALITY OVER QUALITY
ZONE ZONE ZONE 100%

Source: Bester (1999).

Since the value of quality reflects the index of the consumers attitude
to the price, it is evident that we would want it to be as high as possible
relative to the COQ. The profit lies in the difference between them.
Figure XXIX shows that it will not be possible to sell products whose
cost of quality exceeds value of quality. The intersection between the
two curves defines the zone where the product has real economic value.
Notice that the more we reduce the cost of quality, while at the same
time raising the value of quality, the greater the range of economic
viability. An essential question is who has the ability to establish the
value of quality, and who does not. The answer is, as aforesaid, a result
of the test of the interaction between the supplier and the consumer.
The business relationship between the two determines the definition
ofthe quality and its value. The consumer generally checks several
alternatives for quality, value and cost, and in the end selects that which
provides him with a satisfactory result.

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 16. Tools for Cost Tracing

16.1. ABC of Cost Tracing

Activity Based Costing (ABC) is an accounting technique that allows an
organization to determine the actual cost associated with each product
and service produced by the organization without regard to the organi
zational structure. It is essentially an accounting system that measures
the use of resources by activities.
In order to demonstrate an early financial effect, efforts should be
directed extensively at measuring cost reductions. ABC may provide the
tool necessary for quality-based organizations to demonstrate tangible
benefits and visible increases in business performance (Letza and Gadd,
1994).
function of ABC An important function of ABC is for the organizations activities to
be defined as value added or non-value added. Value added activities
are those for which the customers are usually willing to pay (in some
way) for the service. Non-value added are activities that create waste,
result in delay of some sort, add costs to the product/s, or for which the
customer is not willing to pay.

Figure XXX: Activity-Based Costing Model

Sales revenue

Profit
Direct Products
material

Product-
related costs
Direct
Activities Customers
labour
Customer-
related costs

All Inra-
overheads structure Infrastructure
-related costs

Source: Letza and Gadd (1994).

Resources are assigned to activities to allow them to be conducted;

performing the activity results in a cost that can be priced, which can be

180
assigned to the primary output. It is through ABC, that an organization
can begin to see actual dollar costs against individual activities, and find
opportunities to streamline or reduce the costs, or eliminate the entire
activity, especially if there is no value added. Cost drivers31 are then
used to ascribe the costs of those activities to items generating the
activities, e.g. products, customers and company infrastructure. It
therefore allows a more accurate costing of overheads according to their
actual usage (Letza and Gadd, 1994).
ABC offers an accurate management information system, providing ABC
cost data at the business process level. Improvements in processes will characteristics
become visible and tangible benefits will be seen at the crucial 3- to
5year period, because ABC:
is geared to the medium term;
measures activities at the process level;
provides accurate cost data;
identifies customer generated costs;
identifies excess capacity;
focuses on continuous improvement;
is flexible and customizable.
While not a panacea, ABC would appear to have a great deal to offer
the TQM organization. By providing management with better quality
information, it allows better quality decision making and brings the steps for
finance function firmly into the total quality culture. Steps for perfor performing ABC
ming ABC:
analyze activities,
gather costs,
trace costs to activities,
establish output measures,
analyze costs.

Analyze Activities
First the scope of the activities to be analyzed must be identified. It is activities analysis
suggested that the program include at least a half-dozen organizational
units having a common functional orientation, and preferably also
acommon budget somewhere in the reporting chain. The depth and
detail of analysis will be determined by activity decomposition, since

31 A cost driver is a unit measure of a particular overhead that can be assigned to

a user of that overhead. Direct material and labour costs will be assigned to the
product, as in cost accounting methods. For example, in attempting to allocate
administration overheads to products, the cost driver may be the number of
invoices generated for that product. Products generating the most invoices would
therefore acquire the largest share of administration overhead.

181
 activity decomposition is complete when one common or homogeneous
primary output per activity is reached.
A determination then is made if an activity is value or non-value
added; also if the activity is primary or secondary, and required or not
needed. Value added is determined if the output of the activity is directly
related to customer requirements, service or product, as opposed to an
administrative or logistical outcome that services the providing
organization. For instance, if the output of an activity were an inventory
report or update for products (for which there are customers), the
output would be non-value added, but necessary to the organization, i.
e., overhead. A major goal of reengineering is to reduce non-value
added activities and eliminate those that are not necessary. Primary
activities directly support the organizations mission while secondary
activities support primary activities. Required activities are those that
must always be performed while discretionary activities are performed
only when allowed by the operating management.

Gather Costs
collection of costs In this step costs are gathered for the activity producing the products
or services provided as the outcome. These costs can be salaries, expendi
tures for research, machinery, office furniture, etc. These costs are used
as the baseline activity costs. When documents for the costs incurred are
not available, cost assignment formulas may be used.

Trace Costs to Activities

costs consumed by In this step the results of analyzing activities and the gathered
activities organizational inputs and costs are brought together, which produces
the total input cost for each activity. A simple formula for costs is
provided outputs consume activities that in turn have consumed costs
associated with resources. This leads to a simple method to calculate
total costs consumed by an activity multiply the percent of time expen
ded by an organizational unit, e.g., branch, division, on each activity by
the total input cost for that entity. Here we are not calculating costs, just
finding where they come from.

Establish Output Measures

output measures In this step the actual activity unit cost is calculated. Even though
establishment activities may have multiple outputs, only one is identified as the primary
output. Activity unit cost is calculated by dividing the total input
cost,including assigned costs from secondary activities, by the primary
activityoutput volume; the primary output must be measurable and its
volumeor quantity obtainable. From this, a bill of activities can then be

182
calculated which contains or lists a set of activities and the amount of
each activity consumed. The amount of each activity consumed is
extended by the activity unit cost and is added up as a total cost for the
bill of activity.

Analyze Costs
In the final step, the calculated activity unit costs and bills of activity costs analysis
are used to identify candidates for improving the business processes.
Managers can use the information by stratifying, for a Pareto analysis
(see chapter 8.3.3), the activity costs and identifying a certain percentage
of activities that consume the majority of costs. The thing to keep in
mind is that the identification of non-value added activities occurs
through this process with a clarity that allows us to eliminate them, and
at the same time permits the product or service to be provided to the
customer with greater efficiency.

16.2. Vital Few and Trivial Many Principle

In 1906, Italian economist Vilfredo Pareto created a mathematical
formula to describe the unequal distribution of wealth in his country,
observing that twenty percent of the people owned eighty percent of the
wealth. After Pareto made his observation and created his formula,
many others observed similar phenomena in their own areas of experti
se. Quality Management pioneer, Dr. Joseph Juran, recognized auniver
sal principle he called the vital few and trivial many and reduced it to
writing in the late 1940s.
The 80/20 Rule means that in anything a few (20 percent) are vital
and many (80 percent) are trivial. In Paretos case it meant 20 percent of Pareto principle
the people owned 80 percent of the wealth. In Jurans initial work he (80/20 Rule)
identified 20 percent of the defects causing 80 percent of the problems.
Project Managers know that 20 percent of the work (the first 10 percent
and the last 10 percent) consume 80 percent of your time and resources.
You can apply the 80/20 Rule to almost anything, from the science of
management to the physical world.
You know 20 percent of you stock takes up 80 percent of your
warehouse space and that 80 percent of your stock comes from
20percent of your suppliers. Also 80 percent of your sales will come
from 20 percent of your sales staff. 20 percent of your staff will cause
80percent of your problems, but another 20 percent of your staff will
provide 80 percent of your production. It works both ways.
The value of the Pareto Principle for a manager is that it reminds to
focus on the 20 percent that matters. Of the things you do during your

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 day, only 20 percent really matter. Those 20 percent produce 80 percent
of your results. Identify and focus on those things. When the fire drills
of the day begin to sap your time, remind yourself of the 20 percent you
need to focus on. If something in the schedule has to slip, if something
isnt going to get done, make sure its not part of that 20 percent.
There is a management theory floating around at the moment that
proposes to interpret Paretos Principle in such a way as to produce what
is called Superstar Management. The theorys supporters claim that
since 20 percent of your people produce 80 percent of your results you
should focus your limited time on managing only that 20 percent, the
superstars.

16.3. Pareto Chart

In order to put the 80/20 principle into practice in a more statistical
(reliable) way managers can construct so called Pareto chart. It is
aspecial form of a bar graph, used to display the relative importance
ofproblems or conditions.
the purpose of A Pareto chart is used for:
Pareto chart 1. Focusing on critical issues by ranking them in terms of importance
and frequency (example: Which course causes the most difficulty for
students?; which problem with Product X is most significant to our
customers?)
2. Prioritizing problems or causes to efficiently initiate problem solving
(example: Which discipline problems should be tackled first? What is
the most frequent complaint by parents regarding the school?;
Solution of what production problem will improve quality most?)
3. Analyzing problems or causes by different groupings of data (e.g., by
program, by machine, by team)
4. Analyzing the before and after impact of changes made in a process
(example: Has the initiation of a quality improvement program
reduced the number of defectives?)
The left-side vertical axis of the Pareto chart is labelled frequency
(the number of counts for each category), the right-side vertical axis of
the Pareto chart is the cumulative percentage, and the horizontal axis
of the Pareto chart is labelled with the group names of response
variables (identified problems, cost causes, reasons for claims etc.).
Pareto chart How to construct the Pareto chart? Below find the steps in con
construction structing the chart with step-by-step example:
process 1. Determine the categories of problems or causes to be compared.
Begin by organizing the problems or causes into a narrowed down
list of categories (usually 8 or less).

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2. Select a Standard Unit of Measurement and the Time Period to be
studied. It could be a measure of how often something occurs
(defects, errors, cost overruns, etc.); frequencies of reasons cited in
surveys as the cause of a certain problem; or a specific measurement
of volume or size.
3. Collect and Summarize the Data. Create a three-column table with
the headings of error or problem category, frequency, and
percent of total. In the first column list the categories of problems
or causes previously identified. In the frequency column write in
the totals for each of the categories over the designated period of
time. In the percent of total column, divide each number in the
frequency column by the total number of measurements. This will
provide the percentage of the total.
Error Category Frequency Percent of Total
Punctuation 22 44%
Grammar 15 30%
Spelling 10 20%
Typing 3 6%
TOTAL 50 100%

4. Create the framework for the horizontal and vertical axes of the
Pareto Chart. The horizontal axis will be the categories of problems
or causes in descending order with the most frequently occurring
category on the far left (or at the beginning of the horizontal line).
There will be two vertical axes-one on the far left and one on the far
right. The vertical axis on the far left point will indicate the frequency
for each of the categories. Scale it so the value at the top of the axis
is slightly higher than the highest frequency number. The vertical axis
on the far right will represent the percentage scale and should be
scaled so that the point for the number of occurrences on the left
matches with the corresponding percentage on the right.

100%
Frequency of Occurrence

Percentage of Total

80

30 60

20 40

10 20

Error Category

185
 5. Plot the bars on the Pareto Chart. Using a bar graph format, draw
the corresponding bars in decreasing height from left to right using
the frequency scale on the left vertical axis. To plot the cumulative
percentage line, place a dot above each bar at a height corresponding
to the scale on the right vertical axis. Then connect these dots from
left to right, ending with the 100% point at the top of the right
vertical axis.

100%
Frequency of Occurrence

Percentage of Total
80

30 60

20 40

10 20

Error Category

6 Interpret the Pareto Chart. Use common sense-just because a certain

problem occurs most often doesnt necessarily mean it demands your
greatest attention. Investigate all angles to help solve the problems:
What makes the biggest difference? What will it cost to correct the
problems? What will it cost if we dont correct this problem?
In most cases, two or three categories will tower above the others.
These few categories which account for the bulk of the problem will be
the high-impact points on which to focus. If in doubt, follow these
guidelines: Look for a break point in the cumulative percentage line.
This point occurs where the slope of the line begins to flatten out. The
factors under the steepest part of the curve are the most important.
information The Pareto chart answers the following questions:
collected What are the largest issues facing our team or business?
What 20% of sources are causing 80% of the problems?
Where should we focus our efforts to achieve the greatest improve
ments?

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17. Tools for Quality Assessment

17.1. Quality Audits

Improve or perish is the motto that businesses must adopt in order to
remain competitive in the ever changing and expanding global market of
today. Because improvement cannot be recognized unless it ismeasured,
all existing models for quality management, ISO 9001 standard and
quality awards being the two most prominent groups, contain guidelines
for the process of evaluation against them. For instance, a quality audit
measures the effectiveness and achieved improvement of an organiza
tions quality system against the requirements of ISO 9001 model
(Karapetrovic and Willborn 2001).
Basically, evaluation of ones work is as old as work itself. By virtue work evaluation
of being a goal-oriented activity, actual work and its achieved results
(also called performance) are always compared with the planned
objectives. A typical evaluation includes the measurement of effecti
veness (extent to which planned activities are realized and planned
results achieved [ISO 9000:2000]) and efficiency (relationship between
the result achieved and the resources used[ISO 9000:2000]) of the work
process, and subsequent comparison of process performance with the
expected goals.
Quality audit, as a methodology for evaluating system, product and/ the use of quality
or process performance against established requirements, has experien audits
ced substantial growth in worldwide use in recent years. This is largely
due to the steady increase in ISO 9001 registrations. Based on the
fundamental principles of independence, objectivity and professionalism,
the audit is an irreplaceable tool when confirmation of compliance with
standards is sought.
The underlying and common objective of the audit to evaluate
performance against a referenced model is reflected in its definition:
Systematic, independent and documented process for obtaining audit audit definition
evidence, and evaluating it objectively to determine the extent to which
audit criteria are fulfilled (ISO 9000:2000). In order to achieve the
audit objective, we simply need to know two points:
1. Level of performance the reference standard requires; and
2. Whether our actual performance is above or below that level.
In an audit, such an evaluation is performed by collecting and audit criteria and
comparing audit evidence with a reference standard (audit criteria). audit finding
The result of this comparison is called an audit finding. The audit
criteria, ISO 9001 for example, must be designed in such a way that the
finding indicates either compliance or noncompliance with the criteria,

187
 representing the two possible and mutually exclusive audit outcomes.
ISO 9001 standard contains multiple criteria (requirements for mana
gement responsibility and realization processes, among others), thus it
ispossible an audit reveals that some criteria are met, and some are
not.In this case, an audit evaluates the extent to which audit criteria
are fulfilled, that could be anywhere from 0 percent (no criteria met)
to100 percent (full compliance) (Karapetrovic and Willborn, 2001).
Insome cases the auditee also has some leeway in determining the
applicability of certain requirements to his/her business, which can
change the overall number of criteria. For example, parts of section 7,
Product realization of the ISO 9001 standard may be excluded from
aquality system if they are deemed inapplicable.
As quality audits are designed for the purpose of the evaluation
against reference criteria, the inherent characteristics of the criteria
define what kind of methodology will be used to achieve this purpose.
The purpose of the ISO 9001 model is to provide assurance, as a result
of demonstration, that an organization is able to consistently provide
product that meets customer and applicable regulatory requirements
and enhance customer satisfaction through the effective application of
the (quality) system. The ISO 9001 model provides the minimum
requirements for policies, processes and resources that must be in place
for an organization to have a quality system and, by virtue of its
existence, to assure customer satisfaction. The corresponding evaluation
methodology (quality audit) is then limited to assessing whether the
system and underlying procedures are being followed (van der Wiele et
al., 1995). The auditor is only responsible for conforming the conformity
and/or identifying the nonconformity, however the results of audits can
be used by management to improve performance.
principle of Audit methodology has been developed to uphold the principles of
independence independence, objectivity, and a documented search for evidence. An
auditor must be free of any conflict of interest and be unbiased when
making judgments, which is formally assured by his/her independence
of the function being audited. Therefore, technically, it is not possible
to audit ones self. An audit is a special case of the assessment.
Depending on whom the evaluation is performed by, audits can be
external and external and internal. External audits may be performed by a customer
internal audits (second-party), or an independent institution (third-party32) on
behalf of the customer or the organizations own management. When
auditors from one organizational unit are assessing the performance of
another unit, an internal audit is under way.

32 Registrars/certification bodies.

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17.2. Self-audit
While quality system audit is used to evaluate performance against some
set of criteria (ISO 9001 standard) it has its own advantages and
shortfalls. For example it is most often externally required, focuses on
the quality assurance function within an organization only, and relies
oncompetent quality professionals for judgments on compliance with
auditcriteria. Traditional quality audit, carried by professional auditors
commonly fails in enabling continuous improvement and spanning the
differing aspects of business performance beyond conventional quality
assurance. In order to overcome the deficiencies it is necessary to em
power the process owner to conduct periodic self-evaluations of process
performance. Such self-audits would be less formal than quality audits
and aimed at continuous quality improvement.
Self-assessments (self-audits) are cross-functional, less formal, and self-audits
almost always intrinsically motivated. However, the audit is still superior characteristics
with respect to objectivity of the evaluation process, reliability and consi
stency of results, as well as the identification of systematic failures. It has
an added benefit of providing a fresh, independent, and unbiased
outlook of the audited process.
To enhance intrinsic motivation and the depth of the required
organizational change, which are the two most important variables for
the sustainable success of a management, such an integrative approach
must inevitably be based on self-evaluation. Any assessment that is
externally-driven or performed by an outside party is likely to induce
fear, perceptions of uncertainty and coercion, as well as to produce
onlya short-lived and ineffective effort. A self-audit would provide
immediate or on-line feedback on performance.
The process owner, in other words, the person or unit performing
thework itself, should conduct periodic self-evaluations of his/her own
process performance. This concept, branded as a self-audit, is largely
based on the internal quality audit and self-assessment methodology.
Evaluations may be done using formal, standardized procedures (inter formal and
nal audit) or informal guidelines (self-assessment and benchmarking). informal
They can also be conducted on an individual basis, or may involve procedures of self-
awhole department or organization. For example, every conscientious audits
worker checks his/her work (Do Icontinuously achieve what is expect
ed in the proper way? Can Imake improvements? What can Ilearn
from the best people doing the same job?), much like entire organi
zations evaluate their business performance against standards, exce
llence models and best-in-class companies (Karapetrovic and Willborn,
2002).

189
general principles The self-audit can be conducted at different hierarchical levels. At
of self-auditing the bottom level, an individual worker compares his/her performance
with set standards (e.g. a job description), identified strengths, weak
nesses, opportunities and threats (SWOT) and the work of best-in-class
people. At the top level, organizations, which use ISO 9000 standards,
quality awards and benchmarks for reference, perform self-audits of
their business performance. Such audits must be coordinated in both
vertical directions, so that individual self-audit results are utilized at the
unit level, as well as in organizational audits. Conversely, audit criteria
must be communicated throughout the organization and interlinked,
sothat each person is aware of how his/her individual audit criteria
correspond to departmental or company level ones.

Figure XXXI: General principles of self-auditing

RESOURCES PROCESSES OBJECTIVES

Allocation Planning & Design Determination

Self-audit criteria exist Self-audit is planned to Purpose, objectives and
Self-audit criteria are achieve the stated scope of the self-audit
relevant & unambiguous objective are clearly defined
Evidence and Self-audit is a system Feasibility to achieve
information exist the stated objectives is C
Self-audit is based on ensured L
facts I
E
Deployment Implementation Follow-Up N
Process owner is trained Evidence and information Relevant, valid, T
and qualified to conduct are collected and verified communicable and
a self-audit Strengths, weaknesses and verifiable findings are
Adequate & reliable improvement opportunities reported
auditing methods are are identified Self-audit results are
applied included in the business
planning process

System-Wide Principles
Objectivity
Assurance of quality, reliability and maintainsbility
Continuous improvement and non-punitive orientation

Source: Karapetrovic and Willborn (2002).

the source of Self-audits strength, compared to the conventional audit, lies in

self-audit stength aless rigorous evaluation, little external control of compliance with
setprocedures and official guidelines, and the opportunity for joint
identification of improvements in the work place. In a small business,
aself-audit may be the only practical process evaluation method
available. Here the manager, auditor, auditee and the client are usually
functions of the same person. The independence principle of the
traditional audit would require at least two internal auditors in the

190
company, regardless of how small it is. A self-audit is also expected to
bring a solid foundation in data collection, verification and evaluation,
as well as more objectivity to self-assessments. It is also crucial to
understand that self-assessment has no end in itself as a separate
activity.

17.3. Self-assessment and Quality Awards

In recent years, it has become apparent that organizations competing in
any kind of market cannot rely solely on ISO 9000 standards to meet
theincreasing demands for continuous improvement and business
excellence. Consequently, the traditional quality auditing methodology
designed to test quality assurance systems against the standards falls
well short of enabling performance improvement. While there is little
doubt that a system audit is an excellent tool for independent, objective
and systematic evaluation against the standards minimum requirements,
based on professional and statistically sound judgments, there is even
less doubt that some changes are required. Among the problems that
continue to plague the audit are the lack of motivation of participants,
narrow focus on quality assurance, non-existing linkages with business
planning, and the inability to measure efficiency or at least focus on
business results. Meanwhile, self-assessments against quality award self-assessment
models have gained prominence in exactly the areas where quality audits against quality
were lacking, most importantly performance improvement. Although award
they cannot replace quality audits, self-assessments possess one crucial
characteristic that can improve their more formal counterpart: self-
evaluation.
The ability to improve continuously is a predictor of the future of
organizations. In recent years, self-assessment has become an important
management technique for continuously improving overall business
performance. There are some standardized quality models used by firms
in practice as a guide for their implementation, or in order to carry
outself-evaluations of their quality practices. The main models are the
Malcolm Baldrige National Quality Award (MBNQA) model in the world-wide known
USA, the European Foundation for Quality Management (EFQM) quality awards
model in Europe and the Deming Application Prize (DAP) model in
Japan. Although there are some differences between these models, they
have a number of common elements as themes (Ritchie and Dale,2000).
Additionally, there are a number of national quality award models
developed out of MBNQA and/or EFQM, e.g. the Swedish SIQ model
and the Dutch excellence model. During the past few years, many other
countries, including Singapore and the Philippines, have also established

191
 their own national quality awards. All these excellence models are based
on TQM and they are helpful in defining and describing TQM (Van der
Wiele et al., 2000).
National quality award programs promote quality awareness, reco
gnize quality achievements of companies, and provide a platform for
sharing successful quality management initiatives. Most national quality
awards use a framework of criteria that seeks to assess an organizations
quality related performance. These criteria require organizations to show
evidence of innovative approaches, widespread deployment of these
approaches, and a continuous improvement philosophy. These require
ments are prerequisites for organizations to reinforce and improve
quality in work processes, products and services. Recognizing that
organizations can pursue different paths on their quality journey, the
criteria, however, do not look for specific practices but instead rely on
anon-prescriptive perspective during assessment.
self-assessment Quality awards models contain a number of criteria that are divided
against an into sub-criteria and address every aspect of a company. Self-assessment
excellence model is a comprehensive, systematic and regular review of an organizations
activities and results referenced against an excellence model. The
selfassessment process allows the organization to discern clearly its
strengths and areas in which improvements can be made and culminates
in planned improvement actions which are then monitored for progress.
Apart from illuminating areas for improvement, self-assessment provi
des an important cultural benefit because it encourages an ethos of
continuous improvement, promotes a holistic perspective, and allows
people to gain a broader understanding of the business (Zink, Schmidt,
1998).
There is no universal method for self-assessment. An approach to
self-assessment must consider the organizations maturity and culture,
and must be correctly positioned as a part of an overall management
process. Here are the main steps of self-assessment operation:
main steps of plan self-assessment,
self-assessment choose an approach,
plan the implementation,
gain commitment,
communicate the message,
train people,
handle actions for improvement.
When an approach is designed and a plan is established, it is crucial
that there is strong commitment among middle and top management. In
order to maintain their commitment, people must be informed about
targets, execution, and consequences of the self-assessment, andimprove

192
 ents in profitability and overall business performance must be visible.
m
Training of key management and in-house facilitators should be one of
the organization's first priorities when implementing self-assessment. improvement plan
Acritical phase of self-assessment is the establishment of an improve establishment
ment plan that must be presented to higher management, linked to
business planning, and then communicated to the whole organization.
Much too often, organizations fail to do this, and consequently, self-
assessment activities do not lead to lasting improvements. People should
receive training in how to handle improvement actions to develop an
understanding of why to improve and where to start
Self-assessment provides a great opportunity to make comparisons advantages of
with other organizations and identify the best efforts and practiceswithin self-assessment
an organization. Combining self-assessment with external benchmarking
will counteract inside orientation. Ideas can be borrowed and stretched
from areas or disciplines outside an organizations immediate area of
expertise. What is even more important using a model continuously is
better than winning any award. Thus self-assessment should be looked
at as a part of a process and not as a separate activity.

Figure XXXII: The European Quality Award Framework (Business Excellence

Model)
People
People
management
Satisfaction
9%

Leadership Policy and Processes Customer Business

10% Strategy 14% Satisfaction Results
8% 20% 15%

Impact on
Resources Society
9% 6%

Enablers Results
50% 50%

Source: EFQM, 1999.

As you can see from figures XXXII and XXXIII, EQA and MBNQ main quality
as well as majority of quality awards have similar criteria measuring awards criteria
leadership, information analysis, process management, strategic plann
ing, human resource management, partnerships, public responsibility,
quality results, operations results, and customer satisfaction. In most of

193
 these awards, companies are assessed on their approaches, the depth of
deployment in their approaches, and performance results associated
with operations, quality, and customer satisfaction (EFQM, 1999; NIST,
1999). Assessors make a conscious effort to link approaches to results,
and examples are in the areas of human resource and customer satisfac
tion. In actual award application, a company that mentioned specific
approaches to managing or developing human resource should also
report on performance results that are derived from these approaches.
Thus, different companies in different countries may use different
approaches and the performance results that are assessed would mostly
be linked to the stated approaches. This will ensure that companies are
measured on the merit and effectiveness of their approaches and
deployments (Lee and Quazi, 2001).

Figure XXXIII: Baldrige Award criteria Framework

Customer and Market Focused Strategy
and Action Plans

2 5
Strategic Human Resource
Planning Development and
8% Management
10%
1
Leadership 7
11% Business
Results
3
45%
Customer
and 6
Market Process
Focus Management
8% 10%

4
Information and Analysis
8%

Source: Lee and Quazi (2001).

quality awards The MBNQA and EQA criteria are farther-reaching and broader
versus ISO than the ISO 9001 requirements. Also, the ISO 9001 quality assurance
standards standard falls short of strategic quality management in focusing and
implementing quality improvement strategies in delivering ever
improving value to customers and the improvement of a companys

194
overall operational performance. This does not mean that ISO 9001 is
not desirable; the fact that it is being used for registration all over the
world should underscore its definite value. The ISO 9001 registration
process involves much less time and effort then application to any award
criteria. It also involves much less cost. Thus it is recommended that
companies should attempt first getting ISO 9001 registration and then
try to develop and implement quality improvement strategies to satisfy
the MBNQA or EQA criteria.
Tummala and Tang (1996) compare the Malcolm Baldrige and MBNQA versus
European Quality Awards with the ISO 9001 standard as follows: EQA
The MBNQA and EQA are awards whereas the ISO 9001 is acon
tractual quality assurance standard that can be satisfied by registra
tion.
Both the MBNQA and EQA and the ISO 9001 standard are results-
based awards/standards.
The major purposes of the MBNQA and the EQA are to promote
quality awareness, to increase competitiveness, to understand the
requirements of excellence in quality, and to recognize companies
for outstanding quality management and achievement. In addition,
the MBNQA requires that award-winning companies should share
information on their successful strategies with other companies. On
the other hand, the major purpose of ISO 9001 is to implement an
effective quality system to provide confidence in customers that the
intended products and services consistently conform to specified
requirements.
Both the MBNQA and EQA emphasize two factors of competitive
ness; namely, delivery of ever improving value to customers and
improvement of the company's overall operational performance. The
EQA also focuses on a company's financial performance. ISO 9001,
on the other hand, focuses only on conformance to specified require
ments in establishing and maintaining the company's documented
quality system.
In addition to inspection and testing, conformance and documenta
tion play a vital role in planning and implementing an effective
documented quality system that satisfies ISO 9001 requirements. On
the other hand, they are not emphasized in the MBNQA and EQA
criteria.
Companies could regularly use the framework of quality awards to quality awards
benchmark their current quality performance and identify areas of criteria as
improvement. As mentioned earlier, to facilitate wider use of theaward abenchmark
criteria, a self-assessment tool in the form of a survey-based question
naire could be developed for measuring the essential elements in each

195
 of the criteria. Such a self-assessment tool could then be administered
by the award committee to organizations who are not ready for the
actual application of the award but would like to assess their current
quality performance level. Administering such a self-assessment survey
from a central body also helps in setting up benchmarking information
within and outside the industry (Lee, Quazi, 2001).

18. Hard and Soft Tools for Quality

18.1. Fishbone Diagram

Evaluation of quality system might help to recognize the major non-
compliances but can not be solely treated as a quality improvement tool.
Audits enable to put the diagnosis but the treatment and maintenance
depends on some other tools.
hard and soft The range of initiatives and technical tools used towards quality
quality techniques enhancement is very large and diverse. Some include specific human
resource management components such as team building, quality
circles, just-in-time planning, quality action teams, team building,
management workshops, awareness training, customer care training,
customer satisfaction surveys, etc., while some are driven by hard
techniques such as statistical process control (SPC), Pareto charts,
fishbone diagrams (Ishikawa diagrams), histograms, check sheets,
scatter diagrams, run (trend) charts. Like other tools, you have to use
the right one for the job. To describe a process, flowcharts, histograms,
run charts, and Pareto charts can be used. To explore or analyze
aprocess, fishbone diagrams and scatter diagrams can be used. To
monitor a process, run charts and control charts can be used. Not all
ofthem are known and/or suitable for service and namely tourism
enterprises.
cause-and-effect One of the most popular of the above tools is the Cause-and-Effect
diagram diagram, also called the root cause analysis, Ishikawa or fishbone
diagram, because it was drawn to resemble the skeleton of a fish, with
the main causal categories drawn as bones attached to the spine of
the fish (see Figure XXXIV).
The C&E diagram can be used by individuals or teams; probably
most effectively by a group in a brain-storm style session. The most
effective method is to select a scribe (the one who documents) and
then encourage the rest of the team to contribute. Seeing the ideas on
paper often triggers more ideas. The team assists by making sugges
tions and, eventually, the entire cause and effect diagram is filled out.

196
 Causes33 in a C&E diagram are frequently arranged into four major main categories of
categories: C&E diagram
4 Ms: manpower, methods, materials, and machinery (recommended
for manufacturing)
4 Ps: place, policies, procedures, and people (recommended for
administration and service).
4 Ss: Surroundings, Suppliers, Systems, Skills
The basic concept in the C&E diagram is that the name of a basic
problem of interest is entered at the right of the diagram at the end of
the main bone. The main possible causes of the problem (the effect)
are drawn as bones off of the main backbone. The Four-M (P or S)
categories are typically used as a starting point. Different names can be
chosen to suit the problem at hand, or these general categories can be
revised. The key is to have three to six main categories that encompass
all possible influences. Brainstorming is typically done to add possible
causes to the main bones and more specific causes to the bones on
the main bones. This subdivision into ever increasing specificity
continues as long as the problem areas can be further subdivided. The
practical maximum depth of this tree is usually about four or five levels.

Figure XXXIV: Example Fishbone Diagram

environment workers

too hot
training

unhappy
workers

old

management machines

Source: http://quality.enr.state.nc.us/tools/fishbone.htm

Figure XXXIV shows a simple Ishikawa diagram. When the fishbone

is complete, one has a rather complete picture of all the possibilities
about what could be the root cause for the designated problem. Then
team discussion takes place to decide what are the most likely root

33 These guidelines can be helpful but should not be used if they limit the
diagram or are inappropriate. The categories you use should suit your needs.

197
 causes of the problem. These causes are circled to indicate items that
should be acted upon, and the use of the tool is complete.
The empowerment of employees is a mainstay of quality initiatives in
service organizations and a number of companies introduce such tools
like quality circles or quality action teams. Service organizations often
emphasize the point of contact with external customers and that is
probably the reason why hard techniques do not seem to be very
popular in those companies. Much more often they look for some soft
techniques like quality function deployment, critical incidents technique,
and well known benchmarking techniques.
What is more surprising few service companies attempt to measure
the cost savings associated with quality (perhaps this reflects the
difficulties companies experience in trying to quantify the benefits and
costs of quality initiatives). Neither they try to use any techniques to
lower the cost of so called poor quality.

18.2. Quality Function Deployment

In order to gain customers loyalty, the organization must first define
quality, then listen to the customers definition of quality, and then fuse
the two together. This process is called quality function deployment
(QFD) and was first used in Japan to design new products and service
delivery systems. Quality function deployment utilizes the results of
customer research at the product design stage while product engineers
are conceptualizing the new product. In this way, the needs of the
organization and those of the customer can be incorporated into the
product before mass marketing takes place.
three types of Hauser (1993) relates three types of customer needs which are
customer needs necessary to sustain satisfaction and which should be considered when
using the QFD technique. Necessary needs are those absolute needs on
which customer satisfaction depends but which are often taken for
granted value and dependability for the price paid. Desirable needs
are second in importance and are those which are nice to have but not
essential. These nice to haves, however, often attract customers to one
product over another, especially if little cost difference exists between
the two. Variables such as dependability, ease of operation, and service
reputation are highly desirable but are not absolute needs. Last, those
factors which surpass necessary and desirable needs, which are offered
at a reasonable price, and which are deemed of high value are the key to
sustaining customer loyalty and increasing the market share. Because
customers often find these variables difficult to describe or identify, the
use of the QFD process is of great importance.

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 The issue of perceived quality as opposed to objective quality is
important to customer satisfaction and loyalty. When customers perceive
a lack of quality in a product, for any reason, their degree of satisfaction
decreases and they refrain from buying the product. Customer
perceptions about product quality can and do change, but that change in
perception takes time and requires satisfaction which is substantiated
through word of mouth, personal experience, or both. Consequently,
objective quality is less important than customer perceptions of quality
which result from personal experience and fulfilled expectations. When
the product is better than expected, quality is perceived and satisfaction
exists; however, when the product fails to perform as expected, there is a
perceived lack of quality which results in customer .
The main features of QFD are a focus on meeting market needs by House of Quality
using actual customer statements (referred to as the Voice of the
Customer), its effective application of multidisciplinary teamwork and
the use of a comprehensive matrix, called the House of Quality
(Figure XXXV) for documenting information, perceptions and deci
sions.
The QFD methodology is based on a systems engineering approach QFD methodology
consisting of the following general steps (Crow, 2004):
Derive top-level product requirements or technical characteristics
from customer needs (Product Planning Matrix).
Develop product concepts to satisfy these requirements.
Evaluate product concepts to select most optimum (Concept
Selection Matrix).
Partition system concept or architecture into subsystems or assemb
lies and flow-down higher-level requirements or technical characteri
stics to these subsystems or assemblies.
Derive lower-level product requirements (assembly or part characte
ristics) and specifications from subsystem/assembly requirements
(Assembly/Part Deployment Matrix).
For critical assemblies or parts, flow-down lower-level product
requirements (assembly or part characteristics) to process planning.
Determine manufacturing process steps to meet these assembly or
part characteristics.
Based in these process steps, determine set-up requirements, process
controls and quality controls to assure achievement of these critical
assembly or part characteristics.
In a buyers market, it is not enough in itself to supply the basic needs necessary versus
of consumers. In addition to necessary qualities, attractive qualities must attractive qualities
also be developed that will furnish the customer with special value. In
acompetitive market, it is no longer possible to be satisfied with simply

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Figure XXXV: House of Quality

Source: www.isixsigma.com/offsite.asp?A=Fr&Url=http://www.shef.ac.uk/
~ibberson/qfd.html

complying with the required quality to meet consumers' needs. Rather,

it is necessary to invest in, and achieve attractive quality that also meets
their expectations. Since 1966 QFD has been used world wide in nearly
every industry and sector to:
1. Prioritize spoken and unspoken customer wants, and needs;
2. Translate these needs into actions and designs such as technical
characteristics and specifications; and

200
3. Deliver a quality product by focusing various business functions
toward achieving a goal of customer satisfaction.
Some of the benefits of adopting QFD have been documented as: QFD benefits
reduced time to market,
reduction in design changes,
decreased cost of design and services rendering,
improved quality,
increased customer satisfaction.

18.3. Critical Incident Technique

As mentioned in previous chapters, in service settings, customer
satisfaction is often influenced by the quality of the interpersonal
interaction between the customer and the contact employee. Thus, one
central goal in the pursuit of zero defects in service is to work toward
100% flawless performance in service encounters. Here, flawless per
formance is not meant to imply rigid standardization, but rather 100%
satisfying performance from the customers point of view. The cost
ofnot achieving flawless performance is the cost of quality, which
includes the costs associated with redoing the service or compensating
for poor service, lost customers, negative word of mouth, and decreased
employee morale.
There are few ways to check the quality of service encounter. The
mystery guest is a methodology in which a participant is asked to
evaluate experiences and identify important factors that influence the mystery guest
nature of the experiences from a guest viewpoint. This technique is quite
popular in tourism especially within a hotel sector. Hotel managers
sometimes sustain the fear of the mystery guest among employees in
order to guarantee the high level of every service encounter.
However every opinion on service quality is very controversial and
thus quality assessment of the mystery guest does not have to be the best
indicator of the average customers viewpoint. There is also another
possibility to collect information on customers opinions. Frontline ways to obtain
personnel are a critical source of information about customers. There customers
are two basic ways that customer knowledge obtained by contact knowledge
employees is used to improve service. First such knowledge is used by
the contact employees themselves to facilitate their interactions with
customers employees often modify their behaviour from moment to
moment on the basis of feedback they receive while serving customers. frontline
Second is the knowledge used by the firm for making decisions. personnel as
Frontline personnel have frequent contact with customers, they serve a source of
aboundary-spanning role in the firm. As a result, they often have better information

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 understanding of customer needs and problems than others in the firm.
Researchers have theorized and found some evidence that open commu
nication between frontline personnel and managers is important for
achieving service quality (Parasuraman et al., 1990). Schneider and
Bowen (1984) argue that firms should use information gathered from
contact personnel in making strategic decisions, especially decisions
regarding new service development and service modifications.
However the best idea is to confront the employees and customers
point of view. One of the most popular tools to obtain employees and/or
customers opinions on some incidents or quality of service encounter is
so called Critical Incident Technique (CIT) or Critical Point Analysis
incident reports (CPA). It is a research method developed during World War II by
Colonel John C. Flanagan, Director of the Division of Aviation. The
method involves collection of brief, written, factual reports of actions in
response to explicit situations or problems in defined fields. Incident
reports may be written by participants who took action (employees,
customers, hotel guests, passengers etc.), by qualified observers, or both.
Researchers may obtain descriptions of the effective and ineffective
behaviours of people who are performing a given job. Persons in
aposition to observe job performance are asked to report on specific
observable incidents that have had either a positive or negative influ
ence. Reporters describe the antecedents that lead up to the incident,
the behaviour or action that occurred, and the consequences of that
behaviour which led the observer to conclude that it was either effective
or ineffective.
critical points An incident may be defined as critical when the action taken
definition contributed to an effective outcome (helped to solve a problem or
resolve a situation). An incident may also be considered critical when
the action resulted in an ineffective outcome (it partially resolved
aproblem, but created new problems or need for further action).
Acritical incident report should describe a situation, and an action that
was important, significant, critical in determining whether the out
come was effective or ineffective.
Flanagan emphasized that the CIT should be thought of as a flexible
set of principles which must be modified and adapted to meet the
specific situation a hand. Proposals must include a clear, concise
statement of the purpose or aim of the study; specifications for the types
of data to be collected; plans for selection of the population to be used;
guidelines for observing, interpreting and classifying critical incidents;
plans for analyzing data and for interpreting and reporting results.
Because critical incident data can be analyzed both qualitatively and
quantitatively, results tend to be more precise, more explicit and more

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usable than opinion poll data in studies issues related to education,
business, industry, health care, and professional and working life.
The CIT has been used to study what people do in a variety of
professions, which provided data used to identify factors important in
defining criteria for acceptable performance in many fields. Analysis
of thousands of incident reports from project participants and qualified
observers have helped to describe critical requirements for perfor
mance in fields as diverse as piloting and navigating aircraft, improving
the operation of complex devices, designing and manufacturing safer
automotive equipment performing orthopaedic surgery, providing safe/
effective nursing care, and improving the quality of service encounter,
enhancing working conditions in many other fields of human endeavour.
The technique has proven useful in research on ways to help people of
diverse cultures, at all ages and stages, to improve the quality of life and
living.
Frontline employees are good sources of information on customer customers and
attitudes. Many studies (Schneider and Bowen, 1985, Schneider, 1980, employees in CPA
Schneider et al., 1980) based on CIT confirm that employees of hotels,
restaurants, and airlines report all the same categories of customer
satisfaction and dissatisfaction reported by customers in the same
industries. Moreover many frontline employees do have a true customer
orientation and do identify with and understand customer needs in
service encounter situations. They have respect for customers and
adesire to deliver excellent service. Oftentimes the inability to do so is
governed by inadequate or poorly designed systems, poor or nonexistent
recovery strategies, or lack of knowledge. When employees have the
skills and tools to deliver high-quality service, they are proud of their
ability to do so.
The CIT has also proved that, on the contrary, customers can be the customers as
source of their own dissatisfaction through inappropriate behaviour or source of their
being unreasonably demanding. The group of dissatisfactory incidents dissatisfaction
caused by problem customers surface in any service industry and its
existence represents a strategic challenge for the organization as well as
an operational, real-time challenge for service employees. In a time
when customer is king is the stated philosophy of most forward-
thinking organizations, acknowledgment that wrong customers exist,
coupled with creative thinking about customer roles and management of
customer expectations, may considerably deepen understanding of and
ability to cultivate customer relationships.
It is insufficient to look only at the encounter with the customer;
hotels, other tourism companies and even all the TDA must study the
critical incidents in the production process and examine how an

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 oversight in one area might affect the customers satisfaction with the
end result (Edvandersson, 1992). Service industries have always had
acustomer focus, but it now appears to be better focused than before. It
is not sufficient to assume what the customer wants, it is necessary to
find out and to provide it.

19. Competitive Benchmarking as a Service Improvement

Tool
Benchmarking is defined as a process of measuring the performance of
acompany in terms of the products and services offered and the
processes employed against its best competitors. It is important to
determine how the best competitors achieve their performance levels in
order to introduce changes to the practices of the company (Bemowski,
1991).
the concept of Benchmarking is a continuous quality improvement process by
benchmarking which an organization can assess its internal strengths and weaknesses,
evaluate comparative advantages of leading competitors, identify best
practices or functional leaders, and incorporate these findings into
astrategic action plan geared to gain a position of superiority.
Benchmarking is applicable to a wide array of industry including the
hotel industry and has two distinctive approaches: competitive and
process benchmarking. Competitive benchmarking aims to measure
organizational performance against that of competing organizations,
whereas process benchmarking aims to measure discreteprocess
performance against organizations that lead in those processes.
Since Xerox developed a strong benchmarking foundation through
its leadership through quality program in 1979, benchmarking
management has become a competitive technique taken by many
companies such as IBM34, Motorola, AT&T, 3M, DuPont, and Digital
hoping to minimize unit production cost and product defects so as to
improve productivity and meet the customer needs (Chen, 2002). The
CEO of Xerox, David Kearns, defined the benchmarking approach as
to continuously improve the product and service in order to compete
with the best one and the leadership in the industry. The bench
marking process has been recognized in USA as the most important

34 Benchmarking was used by IBM to improve its market management

capability after a cross-industry benchmarking study in the early 1990s. This
resulted in a radically new market management process design that IBM believed
was superior to those of its competitors.

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tool in improving product quality for the past ten years and has been
certified by MBNQA.
The steps of competitive benchmarking may consist of: the steps of
Step 1: Identify and prioritize salient service attributes that influence benchmarking
the overall service quality in hotels. process
Step 2: Develop service quality standards as benchmarks.
Step 3: Conduct competitive gap analysis.
Step 4: Develop strategic action plans for continuous service quality
improvement.
Benchmarking and performance evaluations are components of
modern management practices and parts of TQM. However, the bench
marking process differs from performance evaluation. Performance
evaluation is atool used for measuring productivity, cost efficiency, and
operational advantages, which has traditionally been realized on ahisto
rical basis. The benchmarking process is usually based on acompetitive
basis and is the value of some parameters used as areference point
incomparisons. It could be used to compare the performance within
one corporation (internal) or among different companies in an indu
stry(external). Stonehouse et. al. (2000) argued that successful bench factors of
marking process relies on: benchmarking
commitment from the managers of the organization; success
acceptance of the need for improvement;
willingness to accept others' perspectives;
asupportive community;
continuous development of competence; and
aconstructive vision, mission and clear objectives.
Typically, the benchmarking process comprises four phases, namely,
planning, analysis, integration and action (Dodwell and Zhang, 2000).
The first two phases fall under the external applications (amongst compa phases of
nies) and the last two, internal applications (in each company). Planning benchmarking
lays the foundation and is critical to implementing asuccessful bench
marking project. It involves the complete understanding of the existing
internal processes and measurements. In the planning phase, manage
ment should reach agreement on such issues as: identifying what is to be
benchmarked, identifying competitors, and developing methods for data
collection.
The analysis phase involves analyzing the benchmarking data to iden analysing
tify and understand the practices which best contribute to the subject's benchmark data
strengths. Hence, the company could determine current performance
gap. In the analysis phase, the key questions are these: what is the perfor
mance of the best competition organization? How to determine current
performance, and how to benefit from the benchmark organization?

205
integration phase In the integration phase, the company develops goals and integrates
them into the benchmarking process to obtain significant performance
improvements. The integration phase is to develop goals and integrate
them with the benchmarking approach in order to achieve performance
improvement. This phase addresses such questions as: has top manage
ment accepted this finding? Have the goals been completely communica
ted to all parties involved?
action phase Finally, the action phase needed to achieve the goal is decided in the
integration phase. While this phase follows the third phase, acontinuous
examination of the goals is crucial. The integration and action phases
involve actions that are internal to the benchmarking process, which
should be implemented within the organization.
The central theme of establishing benchmarking is built upon
customer needs, the house of quality technique is considered to be the
most useful quantitative tool to translate directly the voice of the
customer into product development and improvement elements.
Socalled quality function is an activity of continuing quality improve
ment. Therefore, from product design and development to product
disposal, product quality function is clearly established in each stage. As
such, the QFD technique systematically works to fulfil this purpose.
market-based Market-based organizational learning has been identified as an
organizational important source of sustainable competitive advantage. Benchmarking
learning has the potential to become akey learning mechanism for identifying,
building, and enhancing marketing capabilities to deliver sustainable
competitive advantage (Vorhies, 2005). Benchmarking, astructured
process by which afirm seeks to identify and replicate best practices
to enhance its business performance (Camp, 1989, Zairi, 1998), is one of
the most popular management tools in the world. It has become
aprimary instrument in firms total quality management, knowledge
management, and process improvement efforts. It has also been
recommended as amarketing capability improvement tool, with firms
having undertaken benchmarking projects in areas such as customer
satisfaction monitoring and brand management.
learning from Benchmarking is called amarket-based learning process as it means
competitors learning from competitors and peers. Afirm seeks to identify best
practices that produce superior results in other firms and to replicate
these to enhance its own competitive advantage. Over time, the primary
focus of benchmarking has moved from the content of the product or
services produced, the strategy pursued, and performance outcomes
achieved by top-performing firms to aprocess focus on the capabili
tiesbelieved to have produced the superior performance outcomes
observed.

206
Figure XXXVI: The benchmarking process model

Planning phase 1. Identify what is to be benchmarked

2. Identify the competitors
3. Develop the data collection method

Quality Benchmarking Deployment

House of quality

Analysis phase 1. What is the performance of the best

practice organization?

2. Determine the current performance

3. How to benefit from the benchmark?

Integration phase Develop the goals

Communication

Action phase The action plan needed to achieve the goals

Source: Chen (2002).

Benchmarking also provides an important opportunity for learning learning by

by experimentation. The search stage of process benchmarking involves experimentation
identifying the capabilities contributing to superior performance that
should be isolated for further study.
When managers have determined which capability improvements will
likely yield the greatest return, they should then communicate and
discuss benchmarking findings within the firm to develop acommon
understanding, use process mapping tools to conduct more detailed
investigations of the target capabilities in the benchmark sites, agree on
specific capability improvement goals, develop and execute detailed
capability improvement action plans, and monitor outcomes using
market and cost feedback to enhance initial capability improvements
further.
In most cases, large tourism companies are in aposition to secure
adequate physical, financial and human resources needed for the
development of acomprehensive and advanced quality system based on

207
 the concept of TQM. In many cases, they also have satisfactory infor
mation about the areas of improvement in relation to their competitors
as aresult of using the benchmarking technique (Cheshire, 1997).
benefits of Benchmarking helps to focus resources on the performance targets that
benchmarking relate to the areas of improvement against the companys best
competitors. The use of benchmarking is definitely of great importance
in enhancing the performance of an individual tourism company and to
gain market leadership. However, it still provides partial information
about the customer needs. As amatter of fact, benchmarking establishes
only what, in their customers opinion, makes the difference between
the company and its best competitor (Ho, 1995). The new standards that
are set as aresult of applying the benchmarking technique are mainly
conducive to gaining acompetitive advantage by an individual tourism
company. In view of the complex nature of the tourism product, this
technique does not provide sufficient information about the customers
needs in relation to their total tourism experience.

20. Do Loyalty Programmes Serve Tourism Product Quality?

If the company wants to make its stable customers feel welcome and
persuade them that they are better than those who do not use services
of the company, it should make them members of its own private and
exclusive club and offer them benefits to reward their membership
and loyalty. Aclub is one of the most effective forms of relationship
marketing, and can help to strengthen relationships with existing
customers by focusing activities on them, and their wants and require
ments (see the example in table XVI).
the idea of club The basic idea of club cards (customer cards) is to function as
cards atool for customer relationship marketing by offering special advantages
(usually by the form of price reductions or bonuses, or some kinds of
happening) for the card owners. At the same time, the cards serve as
the basis for acustomer database. The key tasks to establish the
customer clubs customer clubs are to (Slight, 1995):
identify the business benefits of the club;
assess the cost of the program;
appoint aprogram coordinator;
research customer requirements;
refine the contents of the program;
develop alaunch strategy;
introduce the concept of the program internally to build commit
ment;

208
 implement the practical requirements of the program- the technical
hotline, the training programs and the mechanism for distributing
product information;
implement any training programs required to deliver quality service
to club members;
introduce the program to the sales force;
develop alaunch program to ensure high levels of awareness among
prospective club members;
operate a launch and sales incentive program to recruit high
membership levels;
implement aprogram to ensure that members continue to receive
high levels of benefit;
develop amembership program that will continue to strengthen
relationships.
Except the typical relationship marketing some enterprises practise one-to-one
so called one-to-one marketing. In fact it represents the companys marketing
attempt to treat its customers as individuals and thereby develop
acontinuing business relationship with them. This approach uses
individually addressable and interactive media to permit dialogue with
customers, and also can offer mass-customized goods and services. The
market-place of the future is undergoing atechnology especially more
opportunities for electronic interactions with individual customers. E.g.
the Marriott Hotel chain, by systematically storing customer information
on preference for a non-smoking room, previous visits to Marriott
Hotels, etc., can treat guests in a customized mode even at their first
visit to a specific hotel location.
An example from tourism practice is the Koala Tours agency, some examples
practicing mass-customized marketing. Arelationship begins when from tourism
acouple orders a honeymoon package. Then, the following year, six practice
weeks before their anniversary, the travel agencys computer system
sends the couple a reminder postcard together with the latest catalogue
of honeymoon packages. The agency is performing an important service:
it reminds valued customers of their upcoming wedding anniversary,
encourages them to spend their second honeymoon in an exotic country,
and makes it easy for customers to book this service at this particular
travel agency.
The underlying strategy is following. Although it would be less expen
sive per person reached to market using one-way media message, it is
cheaper per sale completed to communicate individually with avalued
customer and solve aproblem for him. The agency that has the data
required for the success of such atransaction in this case, customers
wedding date and their special tastes in travelling has ameasurable

209
 advantage in the competition for this specific customers business. In
relationship marketing, information in the database is acrucial
component of the offering. The more information the agency has about
any customer, the deeper the relationship that agency will be able to
develop with that particular customer, and the less likely that customer
will be to leave the franchise.
Companies implementing one-to-one marketing have learned that
(Peppers and Rogers, 1995):
an awareness or image-building advertising campaign can not help
abrand or service which customers perceive as being poor quality;
initiating arelationship marketing database helps to pinpoint product
and service problems and also contributes to continuing improvement
in quality.
With ahigh-quality product, acompany gets satisfied customers
andsatisfied customers tend to return. The basic assumption is that
customer satisfaction drives profitability (Grnroos, 1990). The assump
tion is based on the idea that by improving the quality of the providers
service, customers satisfaction is improved. A satisfied customer
creates a strong relationship with the provider and this leads to relation
ship longevity (or customer retention-customer loyalty). Retention
again generates steady revenues and by adding the revenues over time
customer relationship profitability is improved. Thus the firm can
utilize potential customer relationship economic opportunities in
afavourable way.
When a quality breakdown does occur and customers defect, it is
important to establish exactly why. Along wait at atravel agency or
unwillingness to provide acustomer with information that are fitted
exactly to his needs may be due to inadequate staffing, lack of training,
lack of motivation of staff, complicated form-filling, lack of administra
satisfaction and tive organization or ahost or other reasons. The result is the same
loyalty adissatisfied customer who probably perceives the problem to be
alack of staff. The real root cause, however, may be very different and
needs to be identified if the right strategies are to be implemented to
improve service quality and resulting customer retention. But can we
take it for granted that there is areciprocal influence of quality and
satisfaction?
As mentioned earlier the customer perceived quality is afunction
ofthe customers perceptions of two dimensions: technical quality
(theimpact of the outcome or the technical solution) and functional
quality (an additional impact based on the customers perception of
the various interactions with the firm how the so-called moments of
truth are perceived). In relationship marketing the functional quality

210
dimension grows in importance and often becomes the dominating
one. However perceived service quality can be seen as an outsider
perspective, ajudgment of aservice. It does not even have to be
experienced; it can be based on knowledge about aservice provider
through word-of-mouth or advertising (Liljander and Strandvik,
1995).
The paradox resulting from the definition of consumer satisfaction
and perceived quality is visible. Service quality can be judged low but
the customer is satisfied. This might be the case when the service fits
the customers budget or is priced according to the low quality. Low
satisfaction and high perceived service quality is also a possible
outcome. The customers judge the service to be of high quality but are
not satisfied because what was given (price) is not perceived to
correspond to the received quality. This clearly has to do with the
budget of different customers and their preferences for different
attributes and alternative ways of spending their money and time. That
is why Dave Illingsworth, the first general manager of Lexus USA,
underlines The only meaningful measure of satisfaction is repeat
purchases.
Moreover quality service delivery may not be always required to
retain all customers (Young and Denize, 1995). Some customers
require only minimal competence aligned with aguarantee of relation
continuity or ahigh quality brand name. Other clients are tied to
service providers by their complete dependence on the unique or
business-specific service they provide. Fostering of such ties is
increasingly recommended as an effective loyalty marketing strategy.
Frequent flyer programs and other point-for-benefit clubs are exam
pleof these. Managers can assess what is required by customers and
provide them with that and only that. Such aposition would man
datethat resources invested beyond relationship maintenance are
wasted.
Moving customers up the loyalty ladder is not simple. Firms need to retaining
know in depth what each individual customer wants and how they can customers
continue to add value to the customer offer. Marketing directed at
retaining customers can be expensive and needs to be closely evaluated
against results. Therefore, customers have to be segmented also
according to their value for acompany. Every company must know
how much potential business that person is likely to generate. The
most successful retention programs segment customers into different
levels of existing and potential profitability and focus marketing
activities on them. The most profitable customers (the most valuable
ones) are the ones that should be concentrated on.

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 Table XVI: Loyalty programmes in tourism

The youth agency CKM Travel, apart of aworldwide chain STA Travel that
offers individual tourist products for young people, students and teachers,
introduced the service CKM Online. The customer becomes amember of CKM
club when buying aparticular product CKM 2000 Travel or some of international
cards (EURO<26, ISTC, ISIC, ITIC). Thanks to CKM Online, the customer
gets the access to all products, latest news, current discounts, Internet compe
titions, etc. Information sent to the customer can be selected according to
preferences that were specified in his/her personal profile. Members receive
magazine Big News every three to four months which gives them auseful
insight into the news and discounts that are available. As abonus, club members
can also get free tickets to concerts and other special events.
Some frequent flyer/hotel guest clubs such as the British Airways Executive Club,
introduce clubs service in order to deter customers who make regular high value
purchases, from moving their business to its competitor.
In Kosice, the Golden Royal Company that operates as atravel agency, aguest
house and arestaurant, focuses on club membership, as well as other inter
active form of retaining clients. Their web site, incorporating material from their
print catalogue but with very rapid updates, went on-line in October 1998 and
was targeted at the clients of the travel agency. Golden Royal admittedly sees
their Web site as amarketing awareness tool more than anything else. It views
the electronic catalogue as away to transfer some of the selling function (and
certainly the data entry tasks) to the customer and suggest that customers receive
appropriate incentives such as discounts or membership in an elite group with
preferential treatment. Therefore, the company offers aspecial club card for its
regular clients, which makes possible to get discounts in all activities of Golden
Royal. To the advantages of the club card belong 10% discount in all activities
and 4 % bonus discount in the travel agency for mediated products and 2%
discount for airplane tickets. The customer joins the club after first payment over
1000 SKK, when he or she gets temporary club card Golden Royal, which makes
possible to get 5% discount in all activities. Temporary club card is registered in
its database with individual number constituting an account. After spending
31,000 SKK the client obtains club card Golden Royal. The club card can be
used in the restaurant, the pension, the travel agency (own products 10%,
mediated products 4% and airplane tickets 2%), transport and the congress
hall.

Source: Kachniewska (2005).

customers The best indication of customers potential profitability comes

past behaviour through analyzing acustomers past behaviour, preferences and other
analysis relevant information. Forecasts of an individuals future transactions
can then be modelled using statistical techniques. Some firms already
have established sophisticated databases to track customers transac
tion histories. They can use their record of an individuals transactions,
plus any other customer-specific variables (demographic or psycho
graphic information and data from outside sources) to estimate
apersons life-time spending potential.

212
 One-to-one relationships to customers can easily be created in
tourist facilities. Staff should be encouraged to learn the names, habits
and expectations of customers. In hotel Gloria Palace in Kosice, there
is an attempt of very intimate approach to each customer. Frontline
staff must address each guest by name, even if she or he stays for two
days and may never come back! One of Kartago Tours agency relies on
identifying the 50 best New Years Eve customers by name. Two
months in advance, before the end of the year, special trained staff
send them mails with special offer for upcoming New Years Eve, their
own ICQ number and encourage them to contact them via Internet to
present their special wishes, set all details; and in turn the staff creates
the most suitable offer for them. The one-to-one marketer uses the
opportunity to discuss face-to-face (via Internet or by visiting the
agencys placement), he focuses on the dialogue that leads to greater
understanding of the customer, and then customizes the offering to get
agreater share of business from each of the most valuable travel
agencys customers in the population.

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Concluding remarks

Services, the tertiary sector of economy has vastly gained on importance

in recent years, especially when it comes to the economies of developed
countries. Since the number of firms assembled in this sector increased
rapidly and consumer demands and technologies changed, new and
highly competitive markets have been opened up. The rapid growth has
also introduced new perspectives for quality management. The most
famous formal (ISO 9001) and informal (TQM) quality management
systems try to include the specificity of service activity into the range of
their tools and techniques.
The international demand for tourism products and services no
longer happens automatically; it has to be created. Consumers are
increasingly becoming more sophisticated in the standards which they
expect and more vocal about products and services which do not meet
their requirements in terms of choice and quality. This applies to
awhole range of products and services including those provided by the
hospitality industry. Managements are constantly striving to meet
customer requirements and in an effort to fulfil this objective have
turned to awide continuum of theories and practices such as quality
circles, etc. Total quality is one of the latest concepts to have found
favour in the world of management as ameans to maintain, increase
and consolidate market share (ONeill and McKenna, 1994).
Tourism enterprises as service organizations are likely to face
difficult obstacles in its attempt to improve service quality. This is
because of service intangibility; participation of the customer in the
service delivery; heterogeneous nature of the process; lack of pre
dictability and repeatability of the service process; diverse customer
base sharing the same processing facilities, lack of visibility of quality
shortfalls; difficulties in identifying sources of quality problems; and
the time required to improve service quality. Let the book be avery
basic advisory guide on the route towards quality improvement in
ahospitality industry.

214
List of abbreviations

ABC activity based costing

ANSI American National Standards Institute
ASQ American Society for Quality
ASQC American Society for Quality Control
BSI British Standards Institution
CIT Critical Incident Technique
COC cost of conformance
CONC cost of nonconformance
COQ cost of quality
CPA critical point analysis
CRM customer relationship management
CWQC company wide quality control
DIS draft international standard
EFQM European Foundation for Quality Management
EMS environmental management systems
FDIS final draft international standard
GDS global distribution system
GVC global value chain
HRM human relations management
IEC International Electrotechnical Commission
ICT information and communication technologies
ISO International Organization for Standarization
IT information technology
MBNQA Malcolm Baldrige National Quality Award
MDQ market-driven quality
MOT moments of truth
PAF prevention-appraisal-failure (costs)
PDCA plan-do-check-act (Deming cycle)
PNOC price of nonconformance
POC price of conformance
QFD quality function deployment
QMS quality management systems
ROQ return on quality
SME small and medium-sized enterprise
SPC statistical process control
SQM strategic quality management
TDA tourism destination area
TGA tourism generating area

215
TQC total quality control
TQM total quality management
TQTC total quality tourism consortium
WOM word of mouth
WTO World Tourism Organization

216
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Index

A competitive advantage, 50, 56

accessibility, 34
accountability, 41
Activity Based Costing (ABC), 261,
262, 263
model, 262
steps for performing ABC, 263
American National Standards
Institute, 44
American Society for Quality
Control, 44
audit
audit criteria, 272, 274, 276
audit evidence, 272
audit finding, 272
definition, 272
external audits, 274
internal audit, 274
quality audit, 271, 273, 274, 275
quality audits, 272
B cost of conformance, 254, 255
benchmarking, 297, 298, 300, 302
benchmarking process, 298, 299,
300, 301
establishing benchmarking, 300
brands (trademarks), 225
business and congress tourism, 12
Business Excellence Model, 281
C 250, 251, 252, 253, 257, 258
cause-and-effect diagram, 285, 286
certification, 212, 213, 215, 226, 227
certification/registration body, 214
charter flights, 27
classification, 225
cohesion, 129
commitment, 162
communication, 128, 163
companys image, 57, 91
competition, 24, 27, 29, 51, 53, 54, 79
price competition, 53
complaint management, 50, 103,
104, 105, 106, 108, 109
best practice of, 106
financial impact of complaints,
110
conformity assessment, 212
continuous improvement, 162, 201,
204
COPOLCO, 219, 220
corporate culture, 125, 126
attributes of, 128
strong culture, 127
weak culture, 127
cost of quality, 143, 241, 246, 247,
249, 252, 256, 259, 260
appraisal costs, 246, 248, 250,
251, 252, 257
COQ curve, 251
COQ model, 250, 251
COQ reduction, 245
cost of nonconformance, 255
cost of quality programmes, 256
cost tracing, 261
cost-tracing management, 255
customer-dissatisfaction cost, 243
customer-incurred cost, 243
external failure costs, 249
failure costs, 246, 247, 248, 249,
internal failure cost, 248
loss-of-reputation cost, 244
lost-opportunity cost, 245
poor-quality cost, 245
prevention costs, 248
price of conformance, 250
price of nonconformance, 250
proactive cost, 249
reactive cost, 249
total COQ, 250
credit cards, 27

235
critical incidents, 58
Critical Incident Technique
(Critical Point Analysis), 292,
294
customer (tourist) expectations, 37,
47, 80, 82, 90, 91, 92, 105, 117,
120, 124, 238, 240, 249, 296
antecedents of expectations, 92
prior customer expectation, 229
customer (tourist) needs, 83
customer (tourist) overall
experience, 81
customer (tourist) perception, 91
customer as co-producer, 88, 94,
98
customer care initiatives, 87
communications care, 87, 88
flip care, 87, 88
lead care, 87, 88
quality care, 87, 88
customer clubs, 304
customer confidence, 22
customer databases, 70
customer defined quality, 88
customer focus, 42, 129, 161, 178,
201, 202, 238, 297
customer loyalty, 22, 63, 64, 69, 71,
76, 86, 289, 306
customer orientation, 85
customer participation, 36, 96
customer roles, 102
customers as competitors, 100
customers as contributors to
quality, 99
customers as productive
resources, 98
customers roles, 98
levels of, 97
customer perception, 229
customer retention, 65, 66, 72, 73,
74, 306, 307
customer satisfaction, 37, 47, 50,
51, 53, 71, 81, 82, 111, 161, 196,
258
customer segmentation, 70
customization, 40, 236
cycle of competitiveness, 28
236
D
database management, 70
delivery uncertainties, 42
demand structures, 29
Deming Application Prize (DAP),
278
demographic changes, 29
departmental interaction, 175
differences between goods and
services, 31
discretionary effort, 116
distance travelled, 13
distribution chain, 28
duration of the stay, 13
E
employability, 130
employees, 114, 234
employees behaviour, 132
employees commitment, 132, 144
empowerment, 42, 146, 147, 152, 287
barriers to, 152
benefits of, 149
ways to, 151
environmental focus, 179
error prevention, 162
European Foundation for Quality
Management, 278, 281, 282
European Quality Award, 281, 283,
284
expectations
expected performance, 228
pre-sale tourists expectations, 79
experience properties, 34
exterior people, 148
F
factual approach, 201, 205
financial capabilities, 179
fishbone diagram, 285, 287
fluctuation in demand, 20
frontline staff, 34, 42, 90, 117, 122,
239
G
global distribution systems (GDS), 24
global value chain, 28
globalization, 23, 24, 25, 208
consequences of, 25
demand factors, 24
supply factors, 24
H requirements, 192
HACCP, 227
heterogenity of tourism, 18, 95
holiday experience, 19, 26, 77
horizontal integration, 22
hotel chains, 27
hotel sector, 27
House of Quality, 289, 290
human resource capabilities, 179
human resource management
(HRM), 86, 125, 158
I L
information sources, 92
company communications, 93
individual-specific information
sources, 92
intra-encounter information
sources, 92, 93
pre-encounter information
sources, 92
situational factors, 93
information technology, 24, 27, 70,
190, 223
innovations, 23, 27, 28, 142, 179
technological innovations, 28
interactions, 48
interior people, 148
internal customer, 110
internal environment, 112
internal marketing, 72
international arrivals, 14
interpersonal interaction, 118
factors of, 118
motivations, 119
perception of people, 118
social competence, 118
interpersonal relationship, 140
involvement of people, 201, 202
ISO
International Organization for
Standardization, 187
management system standards,
190
quality management principles,
201
quality management
ISO 9000 family, 198
ISO 9001
in tourism sector, 216
motivation for registration, 208
J
job satisfaction, 57, 61, 64, 74
K
knowledge focus, 179
large-scale tourism, 23
leadership, 83, 88, 112, 132, 133, 134,
144, 148, 152, 160, 163, 174, 175,
176, 177, 179, 191, 201, 202, 206,
281, 297, 303
leadership for quality, 131
loyalty, 63
customer loyalty, 71
staff loyalty, 72
loyalty programmes in tourism, 303,
309
loyalty-based business system, 65
loyalty-based management
customer loyalty ladder, 308
main principles of, 63
second-order effects, 74
M
Malcolm Baldrige National Quality
Award, 59, 242, 278, 283, 284,
298
management commitment, 131
management planning, 175
management style, 173
management system standards, 211
marketing
customized marketing, 70
external marketing, 72
interaction marketing, 72
237
 internal marketing, 71, 72, 110,
111, 112, 113, 114, 116, 131,
146
one-to-one marketing, 304, 306
relationship marketing, 67, 70, 71
marketing strategy
defensive marketing strategy, 69
offensive marketing strategy, 68
mentoring, 135, 136, 143
moments of truth (MOT), 123
motivation, 109, 111, 112, 114, 119,
124, 144, 275, 277, 306
mystery guest, 293
N 234, 239, 289
nature of the trip, 13
O process-based definition, 46
occupancy, 20
organizational culture, 120, 125, 127
elements of, 127
organizational structure, 175
P value-added approach, 66
Pareto
80/20 Rule, 266
Pareto chart, 267, 268, 271
Pareto chart interpretation, 270
vital few and trivial many
principle, 266
perceived quality, 101
perceived quality (performance),
229
perception of people, 118
perishability, 20
physical evidence, 232, 234
physical facilities, 34
physical tangibles, 34
prevention-appraisal-failure (PAF)
approach, 252, 253, 254
price of conformance, 254
process approach, 201, 203
process focus, 179
process management, 192
process orientation, 164
profits, 56
purpose of the visit, 13
238
Q
quality
customer-led definition, 45, 47
areas of improvement, 178
corporate quality, 231, 232
customer defined quality, 88
definition, 43, 44, 47
functional quality, 232
hygiene factors of, 50, 54
interactive quality, 231
internal quality, 132
output quality, 232
perceived, 49
perceptions of quality, 36, 233,
physical quality, 231
process quality, 232
product-based definition, 45
quality terms, 43
supply-led definition, 46
technical quality, 232
user-based definition, 47, 48
value-based definition, 47, 48
quality assurance, 155
quality awards, 132, 277
quality chain, 87
quality characteristics, 35
quality control, 154
quality culture, 125, 136
establihing quality culture, 136
quality development, 177
quality function deployment, 288,
289, 292, 300
quality gaps
communication gap, 239
delivery gap, 239
management perception gap, 238
perceived service gap, 239
specification gap, 238
quality in tourism
quality dimensions in tourism, 80
quality labels, 226
quality management
arguments for, 56
aspects of, 54
 challenges, 21
concepts, 153
definition, 50
economic aspect, 54
evolution, 153
information aspect, 55
law aspect, 55
marketing aspect, 54
proactive approach, 50
reactive approach, 50
social aspects, 55, 60
strategic aspect, 54
strategic quality management
(SQM), 51
technological aspect, 54
quality management in tourism, 59,
60
quality-oriented organization, 133
R (SMEs), 22, 23, 25, 26, 121
registration, 213
relationship marketing, 67, 68, 70,
71, 73, 75, 303, 304, 305, 306,
307
establishing arelationship, 68
relationships
supplier-customer relationships,
87
rent-a car sector, 27
reporting systems, 163
repurchase intentions, 53
retention profitability, 66
return on quality, 256, 258
S T
seasonality of tourism, 20, 81
self-assessment, 277, 279, 280
self-audit, 274, 275, 276, 277
service, 30
evidence of service, 234
service attributes, 33, 38
heterogeneity, 37
inseparability, 36, 78, 81
intangibility, 33, 34, 39, 81, 116,
234
perishability, 20, 33, 35, 36, 78, 81
simultaneity, 33, 36, 234
service encounter, 19, 37, 48, 87, 94,
104, 116, 119, 124, 143, 233, 234,
292
service facilities, 37
service industries, 31
service process, 30, 33
service quality, 89
customer effects on, 94
definition, 43, 49
determinants of quality service,
114
service trinity, 116
service-profit chain, 64
servicescape, 94, 95, 101
SERVQUAL, 234, 235, 240
servuction system model, 101
shared values, 171
signs of quality, 34
small and medium sized enterprises
social bonds, 75
social competence, 118
soft competences, 123
staff fluctuation, 20, 21, 57
staff turnover, 122
standards, 206
strategic alliances, 24
strategic quality management
(SQM), 51
sustainable tourism, 29
SWOT analysis, 276
system approach, 201, 204
systems thinking, 162
teamwork, 129, 162
technical ability deficiencies, 123
technical capabilities, 179
top management focus, 161
total quality approach, 155
total quality management (TQM),
153, 155, 177, 197
basic principles of, 160
definition, 154
implementation process, 160
implementation process, 165
in aTDA, 180
239
 profits of implementation, 167
Total Quality Tourism Consortium
definition, 182
tourism, 12, 14, 17, 20, 24, 119, 218
concept of tourism, 12
domestic tourism, 13
forms of tourism, 13
inbound tourism, 13
outbound tourism, 13
tourism sectors, 12
tourism consumption, 20
tourism demand, 16
fluctuation in demand, 20
tourism destination area (TDA), 18,
19, 60
TQM concept, 180
tourism destinations image, 84
tourism dual economic structure, 22
tourism generating area (TGA), 18
tourism industry, 14, 23, 25, 27, 53,
57, 60, 186, 190, 218
tourism product, 17, 18, 19, 59, 80,
82, 124
characteristics of, 81
demand-related characteristics
of, 81
supply-related characteristics
of, 81
tourism product quality, 77, 84, 182,
183, 184
barriers to quality enhancement,
119
240
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WTOs definition, 84
tourism quality control gap, 18, 19
tourism quality perception gap,
80
tourism sector model, 23
tourism value chain, 18, 19
tourist destinations, 19
training, 162
social skills training, 119
training methods, 142
V
variability, 38
variation, 37
vertical integration, 22
visibility, 41
visitors, 13
same day visitors, 14
tourists (overnight visitors), 13,
14
W
word of mouth (WOM), 34, 68, 83,
93, 104, 105, 118, 224, 229, 258,
289, 292
work environment conditions, 62
working conditions, 121
World Tourism Organization, 12,
218, 219, 221, 332
Z
zone of tolerance, 75