Chapter 15

Organizing for Service Leadership

 Firms may lose market leader position if listen too closely to current customers Service leadership requires curiosity, risk taking Customer-led businesses focus on understanding expressed desires of customers in currently served markets Market-oriented businesses commit to understand current/ latent customer desires plus competitors plans, capabilities

Customer-Led versus Market-Oriented Philosophies of Management

Scan market more broadly, have longer-term focus Work closely with lead users (windows to future vs. anchors to past) Combine traditional research with experimentation, observation
Conclusion: Pursue customer satisfaction, but set limits on being led by customers, especially during rapid change

The Service Profit Chain (Fig. 15.1)

Internal
Operating strategy and service delivery system
Loyalty EMPLOYEES

External
Service concept Target Market

CUSTOMERS
Productivity & Output Quality

Satisfaction

Service Value

Revenue Growth
Satisfaction Loyalty

Capability Service Quality

Profitability

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

Quality and productivity improvements yield higher service quality and lower costs

Lifetime value Retention Repeat business Referral

Causal Links in the Service Profit Chain

(Table 15.1)

Customer loyalty drives profitability and growth

Customer satisfaction drives customer loyalty Value drives customer satisfaction

Employee productivity and retention drive value

Employee loyalty drives productivity Employee satisfaction drives loyalty and productivity

Internal quality drives employee satisfaction

Top management leadership underlies chains success

Integrating Three Functional Imperatives

(recap from Chapter 1)

Marketing Imperative

Human Resources Imperative

Customers

Operations Imperative

Defining Three Functional Imperatives

Marketing Imperative
Target right customers and build relationships Offer solutions that meet their needs Define quality package with competitive advantage

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

Human Resource Imperative

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

Reducing Intra-Organizational Tension

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

The Search for Synergy: A Top Management Perspective

What do we want?

What do our employees, intermediaries, and other partners want?

What do our customers want?

What can we do?

From Losers to Leaders: Moving Up the Service Performance Ladder Service Leaders
Crme de la crme of their respective industries Names synonymous with outstanding service, customer delight Clear positioning strategy Sustained reputation for meeting customer expectations

Service Professionals

Service Non-entities Traditional operations mindset Rudimentary marketing, often emphasizing price discounts

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

 Marketing: move from tactical to innovative and strategic

Achieving Service Leadership by Focusing on Role of Each Functional Area

Operations: move from reactive/cost oriented to focused, innovative, well coordinated with marketing and HR Human Resources: move from tight control of low-cost workers to quality of employees as strategic advantage

Leadership for Change Management Involves Eight Stages

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

Source: John Kotter

Leadership Qualities Needed in Service Organizations

Vision, charisma, persistence, high expectations, expertise, empathy, persuasiveness, integrity Ability to visualize quality of service as foundation for competing Believe in people who work for the firm, make good communications a priority Possess a natural enthusiasm for the business, teach it to others, pass on nuances, secrets, crafts of operating Cultivate leadership qualities of others in organization Use values to navigate firms through difficult times

 Corporate Culture:

Transformational Leadership May Require Changing Corporate Culture

Shared perceptions regarding what is important Shared values about what is right and wrong Shared understanding about what works and what doesnt Shared beliefs about why these things are important Shared styles of working and relating to others

Climate for Service--Tangible working environment atop underlying culture. Influential factors include:
Shared perceptions concerning practices, procedures and types of behaviors that get rewarded Clarity about mission and values, level of commitment to common purpose Flexibility: freedom to innovate, sense of responsibility, standards