Lecture Eleven

Organizing for Change

Management and

Service Leadership (Chapter 15)

Service Quality MKTG 1268

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JAN 2013 Semester

Overview of Chapter 15

The Service Profit Chain

Integrating Marketing, Operations, and Human

Resources

Creating a Leading Service Organization

Leadership, Organizational Culture and Climate

Leadership in the Future

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Opening Case Study : Reinvention and Leadership at

American Express

EFFECTIVE MARKETING

LIES AT THE HEART OF

VALUE CREATION

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The Service Profit Chain (Fig. 15.2)

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Links in the Service Profit Chain (Table 15.1)

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INTEGRATING MARKETING,

OPERATIONS, AND

HUMAN RESOURCES

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Interdependence Between Functions (Fig. 15.3)

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Service Leaders Integrate Functions

Implementation of Service Profit Chain requires

complete understanding of how marketing,

operations and human resource functions relate to a

firm’s strategy

Integrated functions create value for the firm

Strategies are defined and driven by a strong,

effective leadership team

Has a coherent vision of what it takes to succeed

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Defining the Three Functions

Marketing Function Target “right” customers and build relationships

Offer solutions that meet their needs

Define quality package with competitive advantage

Operations Function Create, deliver specified service to target customers

Adhere to consistent quality standards

Achieve high productivity to ensure acceptable costs

Human Resource Function Recruit and retain the best employees for each job

Train and motivate them to work well together

Achieve both productivity & customer satisfaction

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Reducing Inter-functional Conflict

One challenge is to avoid creating ―functional silos‖

High-value creating enterprises should be thinking in terms of activities, not

functions

Top management needs to establish clear imperatives for each function that

defines how a specific function contributes to the overall mission

Inter-functional transfers will

provide a holistic

perspective for individuals

Establishing integrated

project teams

Having inter-functional

service delivery teams

Appointing formally

designated individuals to

integrate objectives

Internal marketing and

training

Commitment of top

management

HOW ?

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Integrating Service Operations

CREATING A LEADING

SERVICE ORGANIZATION

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From Losers to Leaders: Four Levels of Service

Performance (1)

Service Losers

Bottom of the barrel from both customer and managerial

perspectives

Customers patronize them because there is no viable

alternative

New technology introduced only under duress; uncaring

workforce

Service Nonentities

Dominated by a traditional operations mindset

Unsophisticated marketing strategies

Consumers neither seek out nor avoid them

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Lack of leadership will lead to employee

confusion and poor service performance

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From Losers to Leaders: Four Levels of Service

Performance (2)

Service Professionals

Clear market positioning strategy

Customers within target segment(s) seek them out

Research used to measure customer satisfaction

Operations and marketing work together

Proactive, investment-oriented approach to HRM

Service Leaders

The crème da la crème of their respective industries

Names synonymous with outstanding service, customer delight

Service delivery is seamless process organized around customers

Employees empowered and committed to firm’s values and goals

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Companies that exhibit

service leadership

qualities

Moving to a Higher Level of Performance

Firms can move either up or down the performance ladder

Organizations that are devoted to satisfying their current

customers may miss important shifts in the marketplace

As a result, they may face difficulties

attracting demanding new consumers with

different expectations

Companies defending their control of their competitive edge may

have encouraged competitors to find higher-performing

alternatives

Organizations with a service-oriented culture may turn otherwise

as a result of a merger or acquisition that brings in new leaders

who emphasize short-term profits

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Effective HRM Practices Enhances Service

Performance

Leading Change in a Service Organization

Involves 8 Stages

Source: John Kotter

1. Creating a sense of urgency to develop the

impetus for change

2. Putting together a strong enough team to

direct the process

3. Creating an appropriate vision of

where the organization needs to go

4. Communicating that new vision broadly

5. Empowering employees to act on

that vision

6. Producing sufficient short-term results to

create credibility and counter cynicism

7. Building momentum and using that to

tackle tougher change problems

8. Anchoring new behaviors in

organizational culture

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IN SEARCH OF

HUMAN LEADERSHIP

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Leadership vs. Management

Leadership

Concerned with development of vision and strategies, and empowerment of people to overcome obstacles, make vision happen

Emphasis on emotional and spiritual resources

Works through people and culture

Produces useful change, especially non-incremental change

Management

Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving

Emphasizes physical resources—raw materials, technology, capital

Works through hierarchy and systems

Keeps current system functioning

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Setting Direction vs. Planning

Planning

a management process, designed to produce orderly results, not change

Setting direction

involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal

Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy

―Stretch‖ – a challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organization’s reach

Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution

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Individual Leadership Qualities

Love for the business

See service quality as foundation for

competing

Recognize key role of employees

Driven by a set of core values they pass

on

Make communication a priority

Work with a team on decision-making

Know when to change when necessary

Walk the talk

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Qualities Associated with Service Leaders

Understands mutual dependency among

marketing, operations, and human resource

functions of the firm

Has a coherent vision of what it takes to

succeed

Strategies are defined and driven by a

strong, effective leadership team

Responsive to various stakeholders

Value created through customer satisfaction

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Leadership, Culture and Climate (1)

Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams

Effective communication is essential for a leader

Organizational culture:

Shares understanding regarding what is important in the

organization

Shares values about what is right or wrong

Shares understanding about what works and what doesn’t

work

Shares beliefs, and assumptions about why things are

important

Shares styles of working and relating to others

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Leadership, Culture and Climate (2)

Organizational climate

The tangible surface layer on top of the organization’s underlying culture

Factors of influence:

Flexibility, Responsibility, Standards that people set, Perceived aptness of rewards, Clarity people have about mission and values, Level of commitment to a common purpose

Creating a new climate for service, based on understanding of what is needed for market success, may require

radical rethinking of HRM activities, operational procedures, and the firm’s reward and recognition policies

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Creating a

dynamic

organization

culture through

strong

leadership and

management

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Service Insight 15.2

Reversing Course at

the Museum of Fine

Arts (MFA)

© Pearson Education South Asia Pte Ltd 2013. All rights reserved 32

Leadership in the Future

• Leadership is more collaborative, using team

approach with process of collective genius

• Leadership is from behind, by a leader not afraid of

sharing power with others

• Innovation will remain key for organizations to

succeed

• Collective efforts will yield results far superior to

individual efforts

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Service Leadership in a Global Context

Summary of Chapter 15: Change Management and

Service Leadership (1)

Service profit chain provides useful summary of behaviors required of

service leaders to manage effectively

Marketing, operations, and human resource management functions need to

be closely coordinated and integrated in service businesses

Four levels of service performance

Service losers

Service non-entitites

Service professionals

Service leaders

Service leadership is not based on outstanding performance within a single

dimension, but must cut across marketing, operations and human resources

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Summary of Chapter 15: Change Management and

Service Leadership (2)

Leaders play a big part in nurturing an effective organizational culture that transforms an organization into a successful one

Leadership in the future does not just lie in one person. It relies on collective genius. Leaders of the future are not afraid of sharing power with others

Innovation will remain key for organizations to succeed

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