Impact of Employee Performance on Customer Satisfaction in Restaurant Industry: Case of Nandos UK

Research Proposal

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Table of ContentsIntroduction3Organisational Background5Problem Statement5Aims and objectives6Research Questions6Rationale7Significance of the Research7Literature Review8Employee Performance8Key Performance Indicators9Research Methodology10References12APPENDIX 124

Employee Performance and Customer Satisfaction 18

Impact of Employee Performance on Customer Satisfaction in Restaurant Industry: Case of Nandos UK

Introductionto Research In the increasingly globalised and competitive environment of 21st century, delivering high quality service is one of the keys to a sustainable advantage for businesses because customers are key stakeholders for every profit-based organization. Since customer satisfaction is the focus of all business activities, ample amount of research has been conducted to investigate the factors affecting customer satisfaction as well as the impact of customer satisfaction on the businesses. Customer satisfaction has a positive impact on the profitability of an organization and because satisfied customers result in repeat purchases and positively affect the brand image and brand loyalty, they are a key to success for every organisation (Lee et al., 2012, p.20). In the restaurant industry, customer satisfaction has a direct impact on the overall restaurant sales (Hwang and Zhao, 2010, p.95). The restaurant industry of the UK is showing rapid growth with an increase in revenue from 15.5 billion in 2010 to 21.6 billion in 2014. Wages are growing faster than prices and the UK is heading towards deflation, according to The Financial Times (2015), boosting up the restaurants performance as consumers spend generously. Disposable incomes are predicted to grow by 3.7% in 2015 by the EY Item Club, which is apparently the fastest rate in 20 years. People now have more money available to spend. As a result, new restaurants have been opening, including fast casual chains which combine the speed of fast food with dine-in facility (The Financial Times, 2015). The growth of the restaurant industry has increased the pressure on organizations to improve customer satisfaction levels to have a sustainable competitive advantage. In order to deliver quality service, businesses depend on employees. Service quality does not only depend on the quality of delivered service but also on the person delivering the service (Armstrong et al., 2014, p.145). In restaurant industry, employees who directly interact with the customers are the employees on the counter and the waiters / servers. Therefore, the satisfaction of customers is directly linked with the performance of employees. Customer satisfaction is the core element of marketing. If a customer is satisfied with a certain product or service, he or she would be repurchasing that service or a product again on regular basis. On the other hand, if the customer is dissatisfied, he or she may not try the product or service again. Thus, the importance of customer satisfaction can be understood from the fact, higher the customer satisfaction rate, higher would be the businesss revenue thus larger profit margin (Gounaris and Boukis, 2013, p.326). If the aspect of customer satisfaction is not addressed properly by the organization, then it would be facing serious issues in generating revenue for the business. Extreme dissatisfaction can also have a worst result for the company. It can create negative word of mouth from the customer which can harm the business and its reputation to much greater extent. One negative customer can make a chain of negative opinions regarding a product or a service, thus customer satisfaction carries immense importance and should not be ignored at any cost (Kimanuka, 2014). There are number of factors that have an impact on the service quality delivered to customers (Den Hartoget al., 2013, p.1640). These factors include experience, employee performance and the level of hiring. Employee performance is regarded as a vital element for the success of major organizations, thus needs to be evaluated efficiently. Employee performance measurement is a process of analysing a record of outcomes and behaviour that occurred in a specific period, and then compares it with the perfect record that should have been achieved during that same period. Apart from employee behaviour, there are other factors that have a direct impact on employee performance and therefore will be discussed based on the case study of Nandos.

Organisational BackgroundFounded in 1987 in Johannesberg, South Africa by Fernando Duarte and Robert Brozin, Nandos is an international restaurant chain with 1000 outlets and restaurants in over 30 countries. The restaurants offer casual dining with a Portuguese / Mozambican theme. Within 10 years since its inception, there were over 100 restaurants operating across South Africa. The first Nandos restaurantin the UK opened in 1992 in West London suburbs of Ealing and Earls Court. As of 2013, there were about 8000 people employed in more than 280 branches in the UK and Ireland. Nandos UK won the title of Best Place to Work by Sunday Times. Nandos has the largest South African art collection in the UK and more than 5000 of the works are displayed at the restaurants across the UK (Nando UK, 2015).

Problem StatementThe restaurant industry is one of the largest growing businesses in the service sector (Pettipher, 2015). According to The Financial Times (2015), the restaurant industry of the UK is rapidly growing and people are spending more than ever as they have more disposable income. Competition is also increasingly as a result because new restaurants are opening. To sustain a competitive advantage, businesses in the restaurant industry are required to deliver superior quality services in order to attract and retain customers. Since the performance of employees has a direct impact on customer satisfaction, restaurants are required to manage their workforce effectively in order to sustain or increase the customer satisfaction levels and to achieve higher profit margins (Kimanuka, 2015). However, that is not easily achieved because it is unclear exactly how employee performance is related to customer satisfaction. Further research is needed to explore the dynamics of employee performance and customer satisfaction to identify the link between the two variables.

Aims and ObjectivesThe main aim of this study was to analyse how the performance of employee affects customer satisfaction by studying the case of Nandos UK. Following were the objectives of the study: To study the concept of customer satisfaction and its importance for organisations To study the factors affecting employee performance To identify the strategies used by Nandos to improve employee performance To evaluate the impact of employee performance on customer satisfaction in Nandos UK To offer recommendations for organisations operating in the restaurant industry for boosting the performance of their employees in order to increase customer satisfaction

Research QuestionsFollowing research questions were developed to guide the research: What is the significance of customer satisfaction for organisations? Which factors affect the performance of employees? What are the strategies used by Nandos to improve employee performance? How does the performance of employees of Nandos UK affect the customers satisfaction levels?

Rationale of the StudyThe importance of the research can be understood from the fact that higher the customer satisfaction rate, the higher would be the revenues, thus higher profit for the company. Customer satisfaction also has a positive impact on customer loyalty and retention (Kaser, 2010). Customer satisfaction can be achieved by offering superior quality of the product and by giving extraordinary customer services through employees. Particularly in the restaurant business, the way in which employees and waiters interact with customers has a direct influence on customer satisfaction (Kimanuka, 2014). If the food they serve is of excellent quality but customer service is poor, customers are less likely to dine at the same restaurant again and the restaurant may even lose its customers to its biggest competitors as customers would now be looking for some other restaurant that provides better customer service. Despite of evident importance of relationship between employees and customer satisfaction, there are no studies that have empirically studied the impact of employee performance on customer satisfaction in the context of restaurant industry.

Significance of the ResearchThis study will be useful for restaurant businesses because the findings of this study have important implications for all the stakeholders of the restaurant industry, especially the management, the employees and the customers. Restaurant managers could benefit from the findings and recommendations of this study by using this study as a guide to devise better strategies to improve the performance of employees as well as to increase customer satisfaction levels. Employees could benefit from this study by gaining an understanding of how their performance is directly linked with customer satisfaction and how they can contribute to the success of their organisation by directly influencing customer satisfaction. Customers could gain an insight into how their behaviour affects the restaurant employees and the other restaurant workers that come into direct contact with them. Researchers can use this study to formulate research questions to investigate other factors highlighted in this study that affect employee performance and customer satisfaction and use the methodology of this study to conduct further research into the same or other industries.

Literature ReviewEmployee PerformanceEmployee performance, according to Mathis and Jackson (2009, p. 324), is the quantity, quality and timeliness of the output given by the employee as well as the efficiency and effectiveness of the work done (as cited in Tinofirei, 2011, p. 12; Thao and Hwang, 2015, p. 2). According to Thao and Hwang (2015, p. 3), employee performance is reflected through the successful completion of tasks by the employees in accordance with the pre-set targets and standards set by the organisation, as well as efficient and effective utilization of available resources within the dynamic environment of organisation (Thao & Hwang, 2015, p. 8). In contrast, however, Aguinis (2009) argued that performance is related to the behaviours themselves, not to the outcomes of employees behaviours and performance is about what employees do, not about what they produce or their work outcomes (as cited in Onchokeet al., 2015, p. 138). Employee performance is one of the key factors that affect the overall performance of organisations and their success in todays competitive world of business (Thao & Hwang, 2015, p. 8). Ample research has been conducted investigating how employee performance affects and is affected by various factors, for example, Saeed et al. (2013), Sokoro (2012), Njanjaet al. (2013), Edirisooriyaa (2014), Mudaet al. (2014), Thao and Hwang (2015), Tinofirei (2011), etc.

Key Performance IndicatorsKey Performance Indicators (KPI), according to Stan et al. (2012, p. 1), are the performance assessment tools used to identify the level of achieving the pre-defined parameters, standards or targets. Reh (2015) defined KPI as quantifiable measurements that are pre-defined and echo the critical success factors of organisations. These indicators help organisations define and evaluate their progress towards the achievement of organisational goals and are set once the organisations have analysed their mission, identified their key stakeholders and defined their goals. Because organisations exist for different purposes, performance indicators vary across organisations. There is no consensus over a standard and specified set of indicators that can be used to measure the performance of employees across. Burkart (2013) identified six indicators to measure the performance of employees, such as competency, productivity, communication Skills, commitment, cooperation and professionalism. Stan et al. (2012, p. 5) identified several factors to measure employee performance in the industrial production lines, such as frequency of damaged products delivered, number of complaints from crew members, the average number of hours employee worked per week, time saved by innovative processes, number of public awards or appreciation for innovations and the rate of unplanned absenteeism. Catanoet al. (2012, p. 177) considered employees job performance as a complex, multidimensional construct and divided job behaviour into three categories; task performance, contextual performance, counterproductive work behaviour and adaptive performance. Koopmans et al. (2011) conducted a systematic review in management, psychological and medical databases to develop a conceptual framework for measuring individual work performance and identified the three major dimensions as discussed by Catanoet al. (2012, p. 177). Task performance was defined by Koopmans et al. (2011, p. 858) as the proficiency or competency with which an employee carries out his main job tasks. Task performance is also called job-specific task proficiency, technical proficiency and in-role performance and comprises of quantity and quality of work as well as job knowledge. Task performance behaviours, as explained by Catanoet al. (2012, p. 177), contribute to the core business activities, such as production of goods and services, selling merchandise, acquisition of inventory, management and administration, etc.

Research MethodologyThe current study will be based on the positivist philosophy as the researchers aimed to objectively examine the impact of employee performance on customer satisfaction, while acknowledging the existence of unobservable realities. The researchers realize that customer satisfaction cannot be accurately measured because the responses of research participants may be influenced by various situational and personal factors.The type of investigation for this research is explanatory as it sought to explain the relationship between employee performance (independent variable) and customer satisfaction (dependent variable) in the context of Nandos UK. Moreover, the current research will be adapting the deductive approach to study the impact of employee performance on customer satisfaction because the researcher generated hypotheses based on the review of literature and aimed to test it to find the relationship and impact on variable over other. On the basis of this research, the researcher develops and idea about adding or enhancing the theoretical foundation. Deductive approach also helps in gathering unbiased results and accordingly verifies various factors and their relationship with a specific phenomenon (Thornhill, 2011). The nature of the study is quantitative as it relied on collective data through the survey method so that responses could be quantified and analysed using SPSS (Statistical Package for Social Scientists). The current research will use the survey strategy to collect data. The significance of survey can be understood from the fact that it allows the researcher to collect large amount of data through which the researcher can derive valid and reliable results of the study. As compared to other research strategies, Survey allows the researcher to collect data from large number of respondents (Muijs, 2010).The current research will be using non-probability sampling method and convenience sampling technique to identify the sample i.e. n=75 customers of Nandos UK and n=75 employees of UK from Nandos.

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APPENDIX 1Questionnaire

Age: 18-25 26-35 36-45 >45

Gender Male Female Other

QuestionsStrongly AgreeAgreeNeutralDisagreeStrongly Disagree

Behaviour of employees in a restaurant affects your purchasing decision

Employee behaviour is the most important element in a restaurant

The employees at Burn Hotel UK are well trained

The supervision under which employees are working is appropriate at Burn Hotel UK

It does not matter how the employee behaves in the restaurant as it does not affect me

Greater the service level at a restaurant, higher the chances of availing it again

To what extent do you agree to the fact that employee performance results in customer satisfaction

Overall, I am satisfied with the service of the employees at Burn Hotel UK

The employees at Burn Hotel UK are well aware of their responsibilities and duties

The employees at Burn Hotel UK have adequate knowledge of the food they are serving

Do you think, that Burn Hotel UK needs to improve their service to another level