Internal Customer

Management and Service

Gaps within the UK
Manufacturing Sector
Ian Chaston

Internal
Customer
Management
45
Received May 1993
Revised October 1993

University of Plymouth, Plymouth, UK

Introduction
The rapid erosion of Western nation manufacturing companies share of world
markets by Pacific Rim competitors has over recent years stimulated research
on how to achieve and sustain competitive advantage[1-3]. Prompted by writers
such as Ohmae[4] and Pascale and Athos[5], many researchers have focused on
using the Japanese as a standard against which to measure manufacturing
excellence[6,7]. Possibly the most frequently mentioned issue when examining
how Western companies could learn from the Japanese and regain world class
status is to accept the views of individuals such as Crosby[8] or Deming[9] and
adopt a total quality management (TQM) philosophy within the manufacturing
sector.
In advising companies on TQM it is frequently stressed that quality should
not be managed just as the interface between customer and supplier, but instead
should encompass all relationships within the organization through the
creation of internal marketing programmes. Atkinson[10], for example, states
that Emphasis should be on the internal dynamics of the organization,
recognizing that meeting the requirements of the internal customer is as
important as meeting the needs of the external customer. Oakland[11] also
stresses the same point by recommending, For an organization to be truly
effective, every single part must work properly together failure to meet the
requirements in one part or area creates problems elsewhere. It is comments
such as these which have resulted in Schonberger[12] proposing that
departments must consider themselves as members of a customer chain. In
fact recognition of the importance of internal customer management has caused
Christopher et al.[13] to suggest that quality has become the integrating
concept between production and marketingmaking operational the
connection between what the customer wants and the activities of the firm.
Assistance for manufacturers seeking to understand how to manage the
internal customer process has to a certain degree been provided by lessons
learned in the service sector. Attention began to be directed at marketing
management processes within the service sector at end of the 1970s. Various
writers[14-16] have identified the critical importance of sustaining customer
loyalty by emphasizing the capability of employees to deliver consistent service

International Journal of Operations

& Production Management, Vol. 14
No. 9, 1994, pp. 45-56. MCB
University Press, 0144-3577

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quality. Gronroos[17,18] proposed that achievement of this goal required

adoption of an internal marketing strategy to develop quality conscious
employees. He suggested that internal marketing is a holistic process which
integrates the multiple functions of the firm by ensuring employees understand
all aspects of business operations and are motivated to act in a service-oriented
manner. An important factor influencing the internal marketing concept was
Gronrooss conclusion that if firms wish to build stronger relationships with
customers, this is only feasible if preceded by attention to integration of service
provision processes across the entire organization[19].
Research Aims and Methodology
Although academics frequently mention the term internal marketing, a
number of writers[13,20,21] have suggested that many organizations practice
the concept but do not use the terminology and are also more likely to refer to
the activity as internal customer management. Hence, although managers may
not identify with the concept of internal marketing, the widespread publicity
given to the importance of philosophies such as customer care/TQM would lead
one to expect that most UK manufacturing operations have sought to make
employees aware of the internal customer concept. This view is supported by
both research[22] and discussion with managers on Plymouth Business School
post-graduate programmes. These discussions, however, revealed that most
programme participants were somewhat sceptical about the effectiveness of the
internal customer management process within their respective firms.
It was decided, therefore, to gain further understanding of the internal
customer management process within UK manufacturing firms. The specific
objectives of the research project were to determine:
how UK manufacturers manage internal customer relations;
potential barriers to the effective management of internal customer
relations.
Parasuraman et al.[23,24] have developed a research tool known as SERVQUAL
to assess the causes of quality gaps in the provision of services to external
customers. By using SERVQUAL these researchers have evolved a service
management model in which they believe it is necessary to consider the
following types of service gap[25]:
Gap 1, between customers expectations and managements perceptions
of these expectations.
Gap 2, between managements perceptions of customers expectations
and service quality specifications.
Gap 3, between service quality expectations and service delivery.
Gap 4, between service delivery and the influence of external communications on customers expectations.
Gap 5, between customers expectations and customers perceptions of

service delivery, which is caused by the combined influences of Gaps 1

to 4.
To obtain further understanding of internal customer management it was
decided to use a modified version of the SERVQUAL research tool to survey
managers in UK manufacturing operations. Plymouth Business Schools
previous experience of research has shown that employees are concerned about
breaching confidentiality guidelines and that adequate response rates can only
be achieved where respondents are confident data are not capable of being
attributed to a specific source. Hence to achieve an adequate response rate, it
was decided to restrict this survey to managers who have had contact with the
Plymouth Business School through participation in either post-graduate
programmes, client-specific courses or earlier research projects. As a
consequence the data reported in this article are from managers located in the
South-West. Given, however, that many respondents work for either
national/multinational companies, it is felt that the results can be considered as
reasonably representative of internal customer service practices elsewhere in
the UK.

Internal
Customer
Management
47

Results
The survey was mailed to 212 managers. Usable responses were received from
72 individuals representing a response rate of 34 per cent. Over 90 per cent
reported that in recent years their company had implemented initiatives in one
or more of the three areas of customer care, TQM and registration under a
BS/ISO quality standard.
Respondents were asked to rank, in descending order of performance, five
factors which their department considered important in the completion of
assigned responsibilities. As can be seen from Table I, 100 per cent of
respondents identified the accuracy and dependability with which tasks were
carried out as being the most important factor in performance evaluation. Table
II demonstrates that these standards are based on personal judgement, because

Departments ability to complete taks accurately

and dependably

Percentage of respondents

Rank order

100

Departments willingness to help and provide

prompt service to internal customers

64

Departments ability to convey trust and

confidence to internal customers

64

Appearance of departments physical facilities,

equipment and personnel

57

Departments ability to provide caring

individualized attention to internal customers

57

Table I.
Factors Considered
Important in Assessing
Performance of a
Department

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only in 21 per cent and 7 per cent of cases respectively do departments collect
information about internal customer needs or undertake formal market
research inside the organization. Furthermore, 86 per cent of respondents
indicated that it was probable in their organizations that internal customers
rank ordering of factors pertaining to effective management of performance
would be different from that of the supplier department.
As can be seen from Table III, only in the case of accuracy and dependability
do at least half of the respondents report their department has formal/very
formal standards against which staff can judge performance. Nevertheless, as
shown by Table IV, the majority of respondents are confident that their
Percentage of respondents
agree/strongly agree
Department regularly collects information about
needs of internal customers

Table II.
Mechanisms for
Acquiring Knowledge
and Understanding of
Internal Customers

21

Department uses market research information that is

collected about internal customers

Department regularly collects information about

service-quality expectation of internal customers

Department managers interact with internal customers

86

Percentage of respondents
indicating formal/
very formal standards exist
Ability to complete tasks accurately and dependably

Table III.
Existence of Formal
Performance Standards
in Department

50

Willingness to help and provide prompt service

21

Ability to convey trust and confidence

36

Appearance of physical facilities, equipment and personnel

Ability to provide caring, individualized attention

14

Percentage of respondents indicating

department always/usually able to:
Meet standards

Table IV.
Ability to Meet
Standards That Might
Be Established and
Fulfil Promises Made to
Complete Tasks

Fulfil promises

Completion of tasks accurately and dependably

86

89

Willingness to help and provide prompt service

81

71

Convey trust and confidence

80

79

Provide caring, individualized attention

42

57

Appearance of physical faciltities, etc.

78

57

department is always/usually able to fulfil any standards which might be set.

Respondents also indicated that in the majority of cases their department was
always/usually able to fulfil any promises made to their internal customers in
the organization about successfully completing assigned tasks.
Measurement of the effectiveness of working relationships between staff
within departments is provided in Table V. It can be seen from these data that,
in the majority of cases, staff communicate with their managers, there is
staff/manager interaction and communication is not through the impersonal
medium of memos. Nevertheless, only 43 per cent indicate the utilization of faceto-face dialogue over quality and 57 per cent of respondents feel that the
number of management layers may inhibit the communication process.
Organizational commitment to formalizing the internal customer service
management process is described in Table VI. Only in a minority of cases do
respondents indicate that their company commits necessary resources, has
established programmes to improve quality, rewards managers for service
quality performance and emphasizes quality of service ahead of intradepartmental efficiency. Furthermore, it is a minority of organizations which
have attempted to formalize standards for evaluating the provision of internal
customer services.

Internal
Customer
Management
49

Percentage of respondents
agree/strongly agree
Managers and staff communicate with each other
about nature of service output activities

71

Managers seek suggestions from staff about service

output provision activities

50

Managers interact face-to-face with staff engaged

in service provision activities

43

Primary means of communication between staff and

managers is not through memos

79

Number of layers of management impedes information flow

57

Table V.
Nature of Information
Flow within
Department

Percentage of respondents
agree/strongly agree
Department commits sufficient resources to service quality

36

Department has programmes to improve service quality

36

Staff are rewarded for giving priority to service

Emphasis in on putting service before internal efficiency

21

Department has formal process for setting service goals

Department is monitored against specific service goals

14

Table VI.
Orientation towards
Supporting Internal
Customer Service

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50
Table VII.
Actions for Improving
Internal Customer
Service

Percentage of respondents
agree/strongly agree
Department effectively uses automation to achieve consistency
of service provision

50

Programmes exist to improve operating procedures that can

result in greater consistency of service

50

Department has capability to meet internal customer service

needs

71

If gave internal customers the level of service they really want,

department has resources to meet these demands

43

Operating systems are appropriate for meeting customer needs

64

One important way of improving service quality is to seek methods for

standardizing work processes. Table VII provides some evidence that steps are
being taken in this direction, with 50 per cent reporting use of automation to
achieve task consistency and that programmes are in place to improve service
procedures. Many respondents (71 per cent) believe their firm has the
capabilities and the systems (64 per cent) to meet the needs of internal
customers. It is, however, also apparent that most feel their organization would
not have the resources to fulfil a policy of meeting every demand which might
be made of them if a philosophy of total internal customer satisfaction was
adopted.
The majority of respondents are extremely confident of the work team of
which they are a part and feel that employees are adequately qualified (Table
VII). In many organizations, the employer does not provide the tools needed for
the job or grant sufficient freedom to self manage assigned tasks. However, in
57 per cent of cases respondents can rely on others to provide assistance when
required. Nevertheless, it is also apparent from Table VII that there are not very
many organizations where staff performance is appraised in relation to serving
internal customers needs.
No matter the performance criteria against which an employee may be
judged, achieving any standard cannot occur unless appropriate working
conditions have been established within the organization. As can be seen from
responses to issues covered in Table VIII such as amount of paperwork,
commonality of views on what a job entails, understanding of role and ability to
handle change, most respondents feel their working conditions are acceptable.
Barriers to effective performance are, however, reported, including inadequate
information and lack of training in delivery of internal services.
Delivery of adequate service quality is critically dependent on regular
customer/supplier interaction, communication between parties responsible for
service delivery, equality of standards and avoidance of promises being made
which cannot be kept. As can be seen from Table IX, only a minority of

Percentage of respondents
agree/strongly agree
I feel I am part of a team

72

Everyone in department contributes to team effort

57

I feel a sense of responsibility to help others in team

83

My team members and I co-operate more than we compete

71

I feel I am an important member of my department

79

I feel confident in being able to perform my job well

64

Department hires people qualified to undertake their jobs

50

Department provides tool/equipment I need for my job

36

Spend time resolving problems over which I have little control

35

I have freedom to carry out assigned tasks

35

No control because too many customers seek help at same time

28

Can depend on others to help respond to customers demands

57

I am appraised on my ability to serve internal customers

35

Special effort to assist internal customers is not rewarded

79

Internal customers before efficiency is considered important

Level of paperwork makes it hard to do my job well

Internal
Customer
Management
51

7
36

Not difficult to put customers needs ahead of efficiency

50

Internal customers needs and department wants are the same

14

Manager and I share similar views about nature of my job

57

I receive the information needed to do my job effectively

29

Understand all the tasks associated with job role

83

Able to keep up with changes within department

78

Trained in serving the needs of internal customers

21

Understand which issues will be stressed in my appraisal

36

Table VIII.
Nature of Respondents
Personal Views of
Internal Environment
in Their Department

Percentage of respondents
agree/strongly agree
Managers consult with staff about service promises made

36

Made aware of service promises made by managers

29

Staff from different departments interact over service provision

36

Department service standards across organization are consistent

36

Department is under pressure to make promises about service

delivery

29

Other deparments make promises to obtain more resources

14

Table IX.
Promises Made over
Delivery of Service

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respondents indicated that their departments were effectively managing this

aspect of the internal customer service process.
On the issue of whether respondents expected their organization to place
greater emphasis on the management of internal customer relations in the
future, only 27 per cent indicated that was likely/very likely. Reasons to explain
this situation are summarized in Table X. It can been from these results that the
greatest barrier to improving internal customer service is the lack of trust
between departments within the firm.
Percentage of respondents

Table X.
Factors Contributing to
Internal Customer
Concept Not Receiving
Greater Emphasis in
the Future

Do not trust other departments to put needs of internal customers

ahead of departmental efficiency goals

86

Lack confidence in ability to manage move to internal customeroriented organizational philosophy

64

Not convinced customer-oriented philosophy would be of benefit

to department

58

Do not understand the concept of internal customer chains

24

Not aware of the internal customer concept

16

Conclusions
In the nomenclature of external service management, a type 1 gap is caused
where there is a difference between customer expectation and the providers
perception of these expectations. Data in Table I indicate that most respondents
feel their organization places greatest emphasis on staff fulfilling an
intradepartmental requirement for accuracy and reliability. Goals more related
to internal customer-oriented activities are considered of secondary priority.
This scenario does not automatically infer the existence of a gap 1 situation, for
it may be the case that managers have acquired knowledge indicating internal
customers across the organization also feel departments supplying services
should give greatest priority to meeting intradepartmental goals for accuracy
and reliability. Such a possibility, however, is not supported by data in Table II
because only in a minority of cases have departments researched the needs of
their internal customers. Hence it can be concluded that in most respondent
companies, due to minimal effort to understand the nature of internal service
provision requirements, type 1 gaps of differences between customer
expectations and manager perceptions are likely to exist.
Gap 2 situations in external customer service delivery occur because
managers are not very committed to a specific type of activity and reflect this
attitude by not bothering to establish and/or police formal standards of
performance. As can be seen from Table III, even for what is seen as the highest
priority issue, accuracy and reliability, only 50 per cent of respondents indicate
that formal/very formal standards exist. Under these circumstances it seems

reasonable to conclude that gap 2 situations in relation to servicing the needs of

internal customers will occur in the majority of the respondents firms.
Companies may establish standards but then face gap 3 situations where
service delivery fails to be of adequate quality because employees are unable
and/or unwilling to carry out their assigned tasks. As demonstrated by Table
IV, the majority of respondents indicated that their departments are
always/usually able to achieve any standards specified. These respondents also
report an ability to always/usually fulfil any promises which they have made
over successful completion of specified tasks. Hence it can be concluded that in
the provision of services to internal customers, gap 3 situations are only likely
to be encountered in a minority of cases.
In seeking to understand quality problems fully in the provision of services to
external customers, Parasuraman et al.[24] have clearly demonstrated that it is
important to understand the internal climate of the organization through
collecting data on employee opinions about their working environment. These
researchers propose that such data will provide further antecedal evidence of
factors which are contributing to the creation of service gaps.
If there is poor information flow between managers and staff concerned with
service provision, this can generate a type 1 gap (i.e. difference between
customer expectations and management perceptions of expectations).
Activities described in Table V such as suggestion seeking, staff/manager
interaction and non-use of memos lead to the conclusion that in the provision of
internal customer services, gap 1 antecedents are only present in a minority of
respondent organizations. Two potential gap 1 antecedents should be noted,
however, and that is the high proportion of respondents who indicate little faceto-face discussion and the feeling that the number of management layers
impedes information flow.
Delivering the highest possible quality of service is only achieved in those
organizations where all facets of organizational behaviour reinforce the
importance which management assigns to meeting the needs of the external
customer. Positive indicators of a service quality culture are commitment of
resources, programmes to improve quality further, rewarding staff who place
service above efficiency, the existence of performance goals and formal systems
for setting those goals. The same attributes are also necessary if the
organization is to achieve internal customer service goals. As shown by Table
VI, however, only a minority of respondents agree that these activities occur in
their firms. Hence it can be concluded that in most companies, antecedents exist
which will contribute to the widening of the type 2 internal customer service
gap (i.e. employees will have little interest in servicing internal customer needs
because managers have not communicated this to be an important aspect of
specified job roles).
As well as setting formal performance standards, other actions which can be
taken to close type 3 service gaps include attempts to apply automation,
simplification of procedures and use of operating systems to standardize the
provision process. The low proportion of respondents who agree with these

Internal
Customer
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statements in Table VII adds further weight to the conclusion that few
organizations are actively seeking ways to minimize the scale of type 3 gaps in
the provision of internal customer services.
For a workforce to be willing and able to deliver service quality, management
must ensure that employees are capable of fulfilling their job role through
activities such as creating effective teams, establishing supervisory controls
and minimizing the occurrence of role conflict. By failing to fulfil this
managerial responsibility, the organization will create the antecedents for type
3 gaps in service provision. As can be seen from Table VIII, in areas such as
team work, co-operation and knowledge, the level of agreement by respondents
demonstrates that gap 3 situations of the workforce being unwilling to fulfil the
needs of their internal customers only exist in a minority of situations.
Nevertheless, Table VIII also reveals that for certain factors (e.g. lack of control
due to customer demands, inadequacy of tools, lack of emphasis on the
importance of internal customers, access to information and training in service
provision), actions would be required if these antecedents of type 3 gaps are to
be avoided.
Where an organization communicates promises about services via
employees and/or promotional campaigns, this will raise customer
expectations. If there is a discrepancy between these promises and customers
actual experience, a type 4 gap will be created. In Table IX, it is apparent that
departmental managers are making promises to internal customers without
communicating these to their staff and there is inconsistency of service
standards across the organization. Hence type 4 internal service gaps are
probably present in many of the respondent firms.
A type 5 gap occurs where there is a difference between customer expectations and perceptions of service quality. This is caused by the combined
interaction of gaps 1 to 4. Hence in view of results reported in this study, it is
concluded that for most organizations there is high likelihood that a type 5 gap
exists in the management of internal customer service provision.
Buzzell and Gales[26] extensive research of the PIMS database caused them
to conclude that in the long run, the single most important factor affecting a
business units performance is the quality of its products and services. The
widespread utilization of TQM and/or customer care initiatives would suggest
that UK manufacturers fully accept qualitys important influence on
performance. It is therefore somewhat surprising to find this study reveals that
most firms have made little effort to avoid service gaps occurring that have the
potential to disrupt the creation of effective internal customer chains.
This conclusion suggests that there exists a sixth type of service gap; namely
a gap between the theorists claims about the importance of effective
management of internal customers and UK managers perceptions that such
activities are applicable to their specific situation. Hence if UK manufacturers
are ever to aspire to achieving the standards required of world class
companies, urgent actions are required in the area of internal customer chain
management.

Some indications of the nature of possible actions to close gap 6 are provided
in Table X. These data show that for most firms seeking to develop effective
internal customer chains, ways must be found to remove the barriers of distrust
which appear to exist between departments. This should be accompanied by
actions to develop greater confidence in managing the change towards
improving the quality of internal customer service provision and demonstrating
the benefits to be gained in organizational productivity of enhancing active cooperation between departments. Participation in such initiatives will
concurrently lead to greater awareness and understanding of why effective
management of internal customers is a vital component in ensuring the
survival of firms in an increasingly competitive and complex world.
Regretfully, until these objectives are met, it can only be predicted that the
majority of UK manufacturing firms will continue to lose ground in world
markets to those competitors who have learned how to implement a TQM
philosophy effectively throughout all of their operations.
References
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