5 Employees Role in Service Delivery

Moment of Truth & The Service Profit Chain

In the realm of services management, understanding the unique challenges posed by the intangible nature of services is crucial. Unlike physical products, service production is often challenged by its inherent variability, both in terms of customer requests and their subjective preferences. This variability stems from the fact that each customer interaction is unique, influenced by factors such as individual needs, expectations, and the specific context of the service encounter.

Service management researchers have identified five types of customer-introduced variability that a service provider might have to consider:

1. Arrival variability: Customers request service at unpredictable times, complicating resource allocation and scheduling.
2. Request variability: The range of services or products customers ask for can be diverse, challenging operational standardization.
3. Capability variability: Customers possess different levels of skill or knowledge in interacting with the service, affecting the smoothness of service delivery.
4. Effort variability: The amount of work customers are willing to put into the service process varies, impacting overall efficiency.
5. Subjective preference variability: Individual expectations of what constitutes good service differ, making it difficult to satisfy all customers uniformly.

Given the challenges posed by request variability and subjective preference variability, service organizations must rely heavily on their frontline employees to navigate these complex interactions. Employees play a crucial role in adapting to diverse customer requests and managing varying expectations of what constitutes good service. Their ability to handle these variations effectively can significantly impact customer satisfaction and overall service quality.

In addressing request variability, employees must be:

1. Knowledgeable about the full range of services offered
2. Trained and skilled to deliver all the service offered
3. Flexible in their approach to service delivery
4. Skilled at problem-solving to meet unique customer needs
5. Able to communicate effectively to understand and clarify customer requests

When it comes to subjective preference variability, employees need to be:

1. Perceptive in reading customer cues and expectations
2. Adaptable in their service style to match customer preferences
3. Empathetic to diverse customer perspectives
4. Capable of personalizing the service experience

The critical nature of these employee capabilities underscores the importance of effective human resource management in service organizations. Proper training, empowerment, and motivation of employees are essential to equip them with the skills and attitude necessary to handle the variability inherent in service encounters.

To better understand how organizations can support their employees in managing these types of variability, we’ll explore two key concepts in service management: the Moment of Truth and the Service Profit Chain.

The Moment of Truth

The concept of the “Moment of Truth” in service management was popularized by Jan Carlzon, the former CEO of Scandinavian Airlines (SAS), in the 1980s. Carlzon defined a moment of truth as:

“anytime a customer comes into contact with any aspect of a business, however remote, is an opportunity to form an impression.”

This concept emphasizes that every interaction, no matter how brief or seemingly insignificant, has the potential to significantly impact a customer’s perception of the service and the organization as a whole.

In the context of services, moments of truth are particularly crucial because they represent opportunities for service providers to demonstrate their value, competence, and commitment to customer satisfaction. These moments can occur at various touchpoints throughout the customer journey, such as:

• Initial contact with the organization (e.g., website visit, phone call)
• Face-to-face interactions with service employees
• Service delivery processes
• Problem resolution or complaint handling
• Post-service follow-up

The importance of moments of truth lies in their cumulative effect on customer satisfaction and loyalty. Positive experiences during these critical moments can lead to increased customer trust, repeat business, and positive word-of-mouth. Conversely, negative experiences can result in customer dissatisfaction, loss of business, and damage to the organization’s reputation.

To effectively manage moments of truth, organizations must:

1. Identify key touchpoints in the customer journey
2. Train employees to recognize and capitalize on these moments
3. Empower employees to make decisions that enhance the customer experience
4. Continuously gather and analyze customer feedback to improve service delivery

The Service Profit Chain

The Service Profit Chain is a framework that illustrates the relationships between employee satisfaction, customer satisfaction, and organizational profitability in service industries. This model proposes that there is a direct and strong correlation between these elements, creating a chain of cause and effect that drives service organization success.

The key components of the Service Profit Chain include:

1. Internal Service Quality: Workplace design, job design, employee selection and development, employee rewards and recognition, and tools for serving customers.
2. Employee Satisfaction: The result of high-quality support services and policies that enable employees to deliver results to customers.
3. Employee Retention: Satisfied employees are more likely to remain with the organization, reducing turnover costs and maintaining institutional knowledge.
4. Employee Productivity: Satisfied and loyal employees tend to be more productive, delivering higher value to customers.
5. External Service Value: The outcomes for customers, relative to the price of the service and other costs incurred by the customer.
6. Customer Satisfaction: When the service delivered meets or exceeds customer expectations.
7. Customer Loyalty: Satisfied customers are more likely to become repeat customers and recommend the service to others.
8. Revenue Growth and Profitability: The ultimate outcomes of the chain, resulting from increased customer satisfaction and loyalty.

Image source:  https://hbr.org/2008/07/putting-the-service-profit-chain-to-work

The Service Profit Chain emphasizes that by focusing on internal service quality and employee satisfaction, organizations can create a positive ripple effect that ultimately leads to improved financial performance. This model is particularly relevant in the context of service variability, as it highlights the crucial role that motivated and empowered employees play in adapting to diverse customer needs and delivering consistent, high-quality service.

To apply the Service Profit Chain effectively, service organizations should:

1. Invest in employee training and development
2. Create a positive work environment that fosters employee satisfaction
3. Empower employees to make decisions that benefit customers
4. Regularly measure and analyze employee satisfaction, customer satisfaction, and financial performance
5. Use insights from these measurements to continuously improve internal processes and service delivery

By understanding and leveraging the Service Profit Chain, organizations can create a virtuous cycle that addresses the challenges of service variability while consistently delivering value to customers and driving business success.