Organizing for Service Leadership

1. Chapter 15
Organizing for Service
Leadership

2. Customer-Led versus Market-Oriented
Philosophies of Management
• Firms may lose market leader position if listen too closely to current
customers
• Service leadership requires curiosity, risk taking
• Customer-led businesses focus on understanding expressed desires of
customers in currently served markets
• Market-oriented businesses commit to understand current/ latent customer
desires plus competitors’ plans, capabilities
– Scan market more broadly, have longer-term focus
– Work closely with lead users (windows to future vs.
anchors to past)
– Combine traditional research with experimentation,
observation
• Conclusion: Pursue customer satisfaction, but set limits on being led by
customers, especially during rapid change

3. The Service Profit Chain (Fig. 15.1)
Internal External
Operating strategy and Service Target Market
service delivery system concept
Loyalty
EMPLOYEES CUSTOMERS
Satisfaction Revenue
Productivity Growth
& Output
Service
Satisfaction Loyalty
Quality Value
Capability
Profitability
Service
Quality
• Workplace design
• Job design Quality and productivity • Lifetime value
• Selection and development improvements yield • Retention
• Rewards and recognition higher service quality • Repeat business
• Information and communication and lower costs • Referral
• Tools for serving customers

4. Causal Links in the Service Profit Chain
(Table 15.1)
• Customer loyalty drives profitability and growth
• Customer satisfaction drives customer loyalty
• Value drives customer satisfaction
• Employee productivity and retention drive value
• Employee loyalty drives productivity
• Employee satisfaction drives loyalty and productivity
• Internal quality drives employee satisfaction
• Top management leadership underlies chain’s success

5. Integrating Three Functional
Imperatives
(recap from Chapter 1)
Marketing Human Resources
Imperative Imperative
Customers
Operations
Imperative

6. 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

7. Reducing Intra-Organizational Tension
• Transfers and cross training
• Cross functional taskforces
• New tasks and new people
• Process management teams
• Gain-sharing programs

8. The Search for Synergy:
A Top Management Perspective
What do we want?
What do our employees, What do our
intermediaries, and
customers want?
other partners want?
What can we do?

9. From Losers to Leaders:
Moving Up the Service Performance
• Service Leaders Ladder
– Crème de la crème of their respective industries
– Names synonymous with outstanding service, customer delight
• Service Professionals
– Clear positioning strategy
– Sustained reputation for meeting customer expectations
• Service Non-entities
– Traditional operations mindset
– Rudimentary marketing, often emphasizing price discounts
• Service Losers
– Only survive because of lack of viable alternatives in
marketplace

10. Achieving Service Leadership by
Focusing on Role of Each Functional
Area
• Marketing: move from tactical to innovative and
strategic
• Operations: move from reactive/cost oriented to
focused, innovative, well coordinated with marketing
and HR
• Human Resources: move from tight control of low-cost
workers to quality of employees as strategic advantage

11. 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

12. 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

13. Transformational Leadership May
Require Changing Corporate Culture
• Corporate Culture:
– Shared perceptions regarding what is important
– Shared values about what is right and wrong
– Shared understanding about what works and what doesn’t
– Shared beliefs about why these things are important
– Shared styles of working and relating to others
• Climate for Service--Tangible working environment atop
underlying culture. Influential factors include:
– Shared perceptions concerning practices, procedures and
types of behaviors that get rewarded
– Clarity about mission and values, level of commitment to
common purpose
– Flexibility: freedom to innovate, sense of responsibility,
standards