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Chapter15.OrganizingforServiceLeadershipEssentialsofServicesMarketing,SecondEdition
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Chapter 15. Organizing for Service Leadership

LearningObjectives
Bytheendofthischapter,thereadershouldbeableto:
Highlights
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LO1UnderstandtheimplicationsoftheServiceProfitChainforservice
management.
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LO2Appreciatethatmarketing,operations,andhumanresourcemanagement
functionsneedtobecloselyintegratedinservicebusinesses,andunderstandhowthiscanbe
achieved.
LO3Befamiliarwiththefourlevelsofserviceperformance.
LO4Understandwhatactionsarerequiredtomoveaservicefirmfrombeinga
servicelosertorisingasaserviceleader.
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(http://community.safaribooksonline.com/)
LO5Discusstheroleofleadersinnurturinganeffectiveserviceculture.
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LO6Describethequalitiesofleadersofthefuture.
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OpeningVignette:ReinventionandLeadershipatAmericanExpress
Frankly,youcantbeajerkintheservicebusinessandbesuccessfulforalongperiodof
time,saysKennethChenault,CEOofAmericanExpress.Whenyoureintheservice
business,reputationiseverything.However,healsocautions:Sometimeswhenyouare
verysuccessful,youbecomearrogant,andwhatIvetriedtoinstill[here]isaverystrong
senseofcustomerneeds[and]respectforyourcolleagues.
AmericanExpress,bestknowntodayasaniconintravelandfinancialservices,hasevolved
throughwhatitdescribesas150yearsofreinventionandcustomerservice.Establishedin
1850inNewYork,itwasamongthefirstandmostsuccessfulexpressdeliveryfirms
createdduringthewestwardexpansionoftheUnitedStates.Itslargestclientswerebanks.
Deliveringtheirsmallparcelsstockcertificates,notes,currency,andotherfinancial
instrumentswasmuchmoreprofitablethantransportinglargerfreight.Astherailroads
grew,thecompanyfocusedlessonitsdeliverybusinessinfavorofcreatingandsellingits
ownfinancialproducts.Itlaunchedmoneyordersin1882andtheworldsfirsttravelers
checksin1891.TheAmericanExpressnamebecameincreasinglyvisibleoverseas,and
officeswereopenedinEurope.
Fromthe1920sonward,thecompanyfocusedontravelservices,supportedbyselling
travelerschecksandmoneyorders(andprofitedfrominvestingthesubstantialfloaton
theseproducts).ThefirstAmericanExpresschargecardwasissuedin1958.Thisbusiness
grewrapidlyandincludedbothindividualandcorporatecardholders.Goldandplatinum
cardsfollowed,offeringextrafeaturesandprivilegesinreturnforahigherannualfee.
Inanefforttodiversify,AmericanExpresssoughttocreateafinancialsupermarket
throughbuyingupotherfinancialservicefirms.However,theseacquisitionsdidnotprovide
theanticipatedreturnsandthecompanystumbledintheearly1990s.Meanwhile,itscard
businessfacedintensecompetitionfromVisaandMasterCard,onwhichmerchantspaid
lowercommissionrates.
https://www.safaribooksonline.com/library/view/essentialsofservices/9780133359008/ch15.html
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Figure15.1.AmericanExpressofferstravelandexpensemanagement
solutionstocustomers.
In1991,agroupofBostonrestaurateurs,upsetabouthighrates,stagedarevoltnicknamed
theBostonFeeParty,andrefusedtoacceptAmericanExpresscards.Othermerchants
joinedthem,bothathomeandabroad.Chenault,thenarisingyoungexecutive,headedthe
successfulefforttohelpachieveapeacefulsolutionandtoreducerates.Promotedto
presidentandCOO,hebroadenedthecardsappealbyofferingnewfeaturesandloyalty
programs,creatingnewtypesofcards,andsigningupmassmarketretailers,includingWal
Mart.
SoonafterbeingnamedCEOin2001,Chenaultfacedthechallengeofhelpingthecompany
recoverfromboththehumantraumaofseeingtheWorldTradeCenterdestroyedacross
thestreetfromthefirmsheadquartersandthesharpdeclineintravelthatfollowed9/11.
Widelypraisedforhisleadership,Chenaultofferedaroadmapdesignedtomakethe
companyleanerandabletorespondfastertoopportunitiesastheeconomyrecovered.By
2005,hehadcompletedthedismantlingofthefinancialsupermarketandrefocusedthe
businessonitscoreactivitiesofcardservicesandtravel,withoperationsin130countries.As
aresult,AmericanExpressfaredcomparativelywellduringtheglobalfinancialcrisisin
2009throughto2012.
Chenaultlooksbackat2001ascriticalandfundamentaltoourcompanyssuccess.Ittested
ourmanagementinincredibleways.Askedbyareportertodescribehisleadership
philosophy,heresponded,Theroleofaleaderistodefinerealityandgivehope.
Source:NelsonD.Schwartz,WhatsintheCardsforAmex?Fortune,January
22,2001,5870GregFarrell,ACEOandaGentleman,USAToday,April25,
2005,1B,3BOurHistory.BecomingAmericanExpress:150+Yearsof
ReinventionandCustomerService,home.americanexpress.com
(http://home.americanexpress.com) and
http://home3.americanexpress.com/corp/os/history/circle.aspm
(http://home3.americanexpress.com/corp/os/history/circle.aspm) ,accessedMarch12,2012.
The Service Profit Chain

LO1
UnderstandtheimplicationsoftheServiceProfitChainforservicemanagement.
Inouropeningvignette,weseehowaserviceleaderlikeAmericanExpressreinventsitself
withafocusonthechangingcustomerneeds.Businessessucceedbygetting,keeping,and
growingcustomers,sayrespectedconsultantsandauthorsDonPeppersandMartha
Rogers.
ArguingthatWallStreetsongoingobsessionwithcurrentperiodrevenueand
earningscanactuallydestroyvalue,theydeclare:
Investorstodaywantexecutivestodemonstratethattheircompaniescanmakemoney
andgrow,theoldfashionedwaybyearningitfromthevaluepropositiontheyoffer
customers.Theywantafirmscustomerstobuymore,tobuymoreoften,andtostayloyal
longer.Theywantafirmtoshowthatitcangooutandgetmorecustomers....
Bothemployeesandcustomersareequallyimportant,andsuccessinonearearubsoffon
theother.ThisisclearlyshownintheServiceProfitChainmodelwewilldiscussnext,
wherewepullinkeylessonsfromearlierchapters,particularlythoseonmanaging
employees,buildingcustomerloyalty,andimprovingservicequalityandproductivity.We
usetheselessonstoexaminethechallengingtaskofleadingaservicebusinessthatseeksto
becustomerfocusedandmarketoriented.
Important Links in the Service Profit Chain

JamesHeskettandhiscolleaguesatHarvardarguethatwhenservicecompaniesput
employeesandcustomersfirst,thereisabigchangeinthewaytheymanageandmeasure
success.Theyrelateprofitability,customerloyalty,andcustomersatisfactiontothevalue
createdbysatisfied,loyal,andproductiveemployees:
Toplevelexecutivesofoutstandingserviceorganizationsspendlittletimesettingprofit
goalsorfocusingonmarketshare...Instead,theyunderstandthat,intheneweconomicsof
service,frontlineworkersandcustomersneedtobethecenterofmanagementconcern.
Successfulservicemanagerspayattentiontothefactorsthatdriveprofitability...
investmentinpeople,technologythatsupportsfrontlineworkers,revampedrecruitingand
trainingpractices,andcompensationlinkedtoperformanceforemployeesateverylevel.
Theserviceprofitchain,developedfromanalysesofsuccessfulserviceorganizations,puts
hardvaluesonsoftmeasures.Ithelpsmanagerstargetnewinvestmentstodevelop
serviceandsatisfactionlevelsformaximumcompetitiveimpact,wideningthegapbetween
serviceleadersandtheirmerelygoodcompetitors.
TheServiceProfitChain,showninFigure15.2,showsthelinksinamanagerialprocessthat
areproposedtoleadtosuccessinservicebusinesses.
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Source:ReprintedbypermissionofHarvardBusinessReview.FromPutting
theserviceprofitchaintowork.ByJ.L.Heskett,T.O.Jones,G.W.Loveman,
W.E.SasserJr.,andL.A.Schlesinger,(MarchApril),166.Copyright1994by
theHarvardBusinessSchoolPublishingCorporationallrightsreserved.
Figure15.2.Theserviceprofitchain.
Table15.1providesausefulsummary,highlightingthebehaviorsrequiredofserviceleaders
inordertomanagetheirorganizationseffectively.Workingbackwardfromthedesiredend
resultsofrevenuegrowthandprofitability,Links1and2focusoncustomers.Thelinks
includeanemphasisonidentifyingandunderstandingcustomerneeds,makinginvestments
toensurecustomerretention,andhavingacommitmenttoadoptnewperformance
measuresthattracksuchvariablesassatisfactionandloyaltyamongbothcustomersand
employees.Link3focusesonthevalueforcustomerscreatedbytheserviceconcept,and
highlightstheneedforinvestmentstocontinuallyimprovebothservicequalityand
productivity.
Table15.1.Linksintheserviceprofitchain
Source:JamesL.Heskettetal.,PuttingtheServiceProfitChaintoWork,
HarvardBusinessReview,MarchApril1994JamesL.Heskett,W.Earl
Sasser,andLeonardL.Schlesinger,TheServiceProfitChain,Boston:Harvard
BusinessSchoolPress,1997.
Anothersetofserviceleadershipbehaviors(Links47)relatetoemployeesandinclude
organizationalfocusonthefrontline.Thedesignofjobsshouldoffergreaterfreedomfor
employees.Managerswithpotentialshouldalsobedeveloped.Thiscategoryalsostresses
theideathatpayinghigherwagescanactuallydecreaselaborcostsbecauseofreduced
turnover,higherproductivity,andhigherquality(Chapter11).Underlyingthechains
success(Link8)istopmanagementleadership.
Getting the Service Profit Chain Right Creates Shareholder Value

LO2
Appreciatethatmarketing,operations,andhumanresourcemanagementfunctionsneedto
becloselyintegratedinservicebusinesses,andunderstandhowthiscanbeachieved.
Firmsthatdoitrightwillberewardedbyanincreaseinthevalueattachedtothe
organizationitself,showninpubliccompaniesbytheirstockprice.Animportantdifference
betweenserviceleadersandfirmsinothercategoriesishowtheyapproachvaluecreation.
Serviceleaderscreatevaluethroughcustomersatisfactionandtherelationshipsinthe
earlierpartsoftheServiceProfitChain.Nonleadersoftenaimtoincreaseshareholdervalue
throughtacticalmeasurestoincreasesales,shorttermcostcutting,selectedselloffs,and
takingadvantageoffinancialmarketdynamics.
Integrating Marketing, Operations, and Human Resources

TherelationshipsintheServiceProfitChainshowthat,inservicefirms,threemanagement
functionsplayveryimportantandinterrelatedrolesinmeetingtheneedsoftheir
customers:marketing,operations,andhumanresources(HR).Figure15.3showshowthese
departmentsdependoneachother.
Figure15.3.Marketing,operations,andhumanresourcesfunctionsmust
collaboratetoservethecustomer.
How Are Marketing, Operations, and Human Resources Linked?

Inwhatwaysdothedepartmentsdependoneachother?Asweveseen,manyservice
firms,especiallythoseinvolvingpeopleprocessingservices,areactuallyfactoriesinthe
field.Customersenterwhentheyneedtheservice.Whencustomersareactivelyinvolved
inproductionandtheserviceoutputisconsumedasitisproduced,theservicesmarketing
functiondependsontheprocedures,personnel,andfacilitiesmanagedbyoperations.Ina
highcontactservice,thequalityandcommitmentofthefrontlinehavebecomeamajor
sourceofcompetitiveadvantage.ServiceorganizationscannotaffordtohaveHRspecialists
whodonotunderstandcustomers.Whenemployeesunderstandandsupportthegoalsof
theirorganization,havetheskillsandtrainingneededtosucceedintheirjobs,andrecognize
theimportanceofcreatingandmaintainingcustomersatisfaction,bothmarketingand
operationsactivitiesshouldbeeasiertomanage.
Eachofthethreefunctionsshouldhaverequirementsandgoalsthatrelatetocustomers
andcontributetothemissionofthefirm.Theycanbeexpressedgenerallyasfollows:
Themarketingfunction.Totargetthetypesofcustomerswhomthefirmisableto
servewellandcreateongoingrelationshipswith.Thiscanbeachievedbydeliveringa
carefullydefinedserviceproductpackageinreturnforapricethatoffersvaluetocustomers
andprofitstothefirm.Customerswillrecognizethatthispackageisoneofthequalities
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thatdeliversolutionstotheirneedsandisbetterthanthatofferedbyothercompeting
firms(Figure15.4).
Figure15.4.Verizondeliverssolutionstocompaniesthatneedtobe
productivevirtuallyanytime,anywhere.
Theoperationsfunction.Tocreateanddelivertheservicepackagetotargeted
customers.Thisisdonebyselectingthoseoperationaltechniquesthatallowthefirmto
continuouslymeetcustomerdrivenprice,schedule,andqualitygoals.Thetechniquesshould
alsoallowthebusinesstoreduceitscoststhroughcontinuingimprovementsinproductivity.
Thechosenoperationalmethodswillmatchskillsthatemployeesandintermediaries
currentlyhaveorcanbetrainedtodevelop.Thefirmwillhavetheresourcestosupport
theseoperationswiththenecessaryfacilities,equipment,andtechnology(Figure15.5).At
thesametime,thefirmwillavoidnegativeimpactsonemployeesandthebroader
community.
Figure15.5.Kodakoffershospitalsservicesthatstreamlineprocesses,
integratetechnologiesandimproveoverallproductivity.
Thehumanresourcefunction.Torecruit,train,andmotivatefrontlineemployees,
servicedeliveryteamleaders,andmanagerswhocanworkwelltogetherforasatisfactory
paypackage.Theseemployeeshavetobalancethetwingoalsofcustomersatisfactionand
operationaleffectiveness.Employeeswillwanttostaywiththefirmandtoimprovetheir
ownskillsbecausetheyvaluetheworkingenvironment,appreciatethechallengesthey
face,andtakeprideintheservicestheyhelptocreateanddeliver.
Asservicefirmsplacemoreemphasisondevelopingastrongmarketorientationand
servingcustomerswell,thereisincreasedpotentialforconflictamongthethreefunctions,
especiallybetweenmarketingandoperations.Howcomfortablycanthethreefunctions
coexistinaservicebusiness,andhowaretheirrelativerolesperceived?Sandra
Vandermerwemakesthepointthathighvaluecreatingenterprisesshouldbethinkingin
termofactivities,notfunctions.
Yet,inmanyfirms,westillfindindividualsfrommarketingandoperationshavingconflicts
witheachother.Marketersmayseetheirroleasoneofcontinuallyaddingvaluetothe
productoffering,enhancingitsappealtocustomers,andstimulatingsales.Operations
managers,however,mayseetheirjobascuttingdownonextrastoreflecttherealityof
serviceconstraintssuchasstaffandequipmentandtheneedtocontrolcost.Afterall,
theymayargue,novaluewillbecreatedifweoperateataloss.Conflictsmayalsooccur
betweenhumanresourcesandtheothertwofunctions,especiallywhereemployeesarein
boundaryspanningrolesthatrequirethemtobalancecustomersatisfactionagainst
operationalefficiency.
Partofthechallengeofservicemanagementistoensurethateachofthesethreefunctions
cooperatewiththeother.Potentialwaystoreduceinterfunctionalconflictandbreakdown
thebarriersbetweendepartmentsinclude:
1.Transferringindividualsinternallytootherfunctionsandallowingthemtodevelopa
moreholisticperspectiveandbeabletoviewissuesfromthedifferentperspectivesofthe
variousdepartments.
2.Establishingcrossfunctionalprojectteams(e.g.,fornewservicedevelopmentor
customerserviceprocessredesign).
3.Havingcrossfunctionalservicedeliveryteams.
4.Appointingindividualswhosejobistointegratespecificobjectives,activities,and
processesbetweendepartments.Forexample,RobertKwortnikandGaryThompson
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suggestformingadepartmentinchargeofserviceexperiencemanagementthat
integratesmarketingandoperations.
5.Carryingoutinternalmarketingandtraining(seeChapter11).
6.Havingtopmanagementscommitmenttoensurethattheoverarchingobjectivesofall
departmentsareintegrated.
Do We Need Additional Skill Sets besides Marketing, Operations, and Human

Resources?
Servicessystemsarebecomingincreasinglycomplex.Manyservicesarecruciallydependent
oninformationtechnologyandcommunicationsinfrastructures(e.g.,inglobalfinancial
servicefirms),largeandcomplexfacilities(e.g.,inintegratedairportinfrastructures),
complexprocessengineering(e.g.,globallyintegratedsupplychainsinB2Bcontexts),and
soon.Atahigherlevel,servicesystemsareevolvingintoascienceinwhichitisnecessary
tohaveexpertswhohaveknowledgethatcutsacrossthedifferentdisciplinessuchas
informationtechnology,engineering,andservicemanagement(seeServiceInsights15.1).
ServiceInsights15.1:IBMsServiceScienceInitiative
Organizationshavemanyfunctionaldepartmentssuchasmarketing,logistics,
andresearchthatworkindependently,ratherthanjointlytogether.Even
businessschoolstraintheirgraduatesinspecificdisciplinessuchas
accounting,finance,marketing,andoperationsmanagement.Theresultis
thatemployeesoftenlacktheknowledgeabouthowtointegrateacross
functions.Furthermore,theytendtoknowevenlessaboutotherimportant
disciplines,suchasinformationtechnologyorprocessengineering,thatare
alsonecessaryfordesigningandmanagingcomplexservicesystemswell.
IBMrecognizedthisproblemandhasbeenleadingtheworldinitsinitiative
onservicescience,whichIBMtermedServiceScience,Managementand
Engineering(SSME).SSMEcombinesknowledgeincomputerscience,
operationsresearch,engineering,businessstrategy,managementscience,
socialandcognitivescience,andlegalsciencesothatthenecessaryskillsare
developedfortheserviceeconomy.IBMhasbeenmobilizinguniversitiesand
researchcenterstocollaboratewiththem.
Today,servicesciencehasbecomeapartofthecurriculuminmany
universitiesaroundtheworld.Theseuniversitiesfocusoninterdisciplinary
researchandteachingsothattheyareabletoproduceTgraduatesthose
whohaveindepthknowledgeinonespecializedarea,aswellasknowledge
thatcutsacrossseveraldisciplinessothatexpertsfromthesevarious
disciplinescanworktogetherwell.
Servicescienceisanapproachtoenableustostudy,design,andmanage
effectiveservicesystemsthatcreatevalueforourcustomers.Companiesthat
recognizethiswillhiregraduateswiththenecessaryknowledgeandskillsin
servicesciencesothattheycanhaveanedgeinthecompetitiveservice
economy.Bystudyingservicesmarketing,youhavemadeafirststeptoward
becomingfamiliarwithservicescience,butyouneedtobeawarethatall
theseotherdisciplinesarealsoimportantandyoushouldworkonpickingup
keyconceptsinthosefields,too.
Sources:AreWeReadyforSERVICE?ThinkTank,October10,2005,
www.research.ibm.com/ssme/20051010_services.shtml
(http://www.research.ibm.com/ssme/20051010_services.shtml) ,accessedMarch12,
2012M.M.DavisandI.Berdrow,ServiceScience:CatalystforChange
inBusinessSchoolCurricula,IBMSystemsJournal47,no.1(2008):
2939R.C.Larson,ServiceScience:AttheIntersectionof
Management,Social,andEngineeringSciences,IBMSystemsJournal
47,no.1(2008):4151PaulP.MaglioandJimSpohrer,Fundamentals
ofServiceScience,JournaloftheAcademyofMarketingScience36,
no.1(2008):1820.
Creating a Leading Service Organization

Sofar,wehavediscussedtheserviceprofitchainthatprescribesbestpracticemanagement
thinkingabouthowtorunaservicefirm,andtheneedforintegrationacrossfunctionsand
disciplinetobeabletocreateandeffectiveserviceprofitchainforaservicebusiness.Letus
nextexplorewhatittakestomoveafirmfrombeingaservicelosertobecomingaservice
leader.
From Losers to Leaders: Four Levels of Service Performance

LO3
Befamiliarwiththefourlevelsofserviceperformance.
Serviceleadershipisbasedonexcellentperformanceacrossmultipleareas.Tocapturethis
performancespectrum,weneedtojudgethefirmwithineachofthethreefunctionalareas
describedearlier:marketing,operations,andhumanresources.Table15.2changesand
extendsanoperationsorientedframeworkproposedbyRichardChaseandRobertHayes.
5
Serviceperformersaregroupedintofourlevels:loser,nonentity,professional,and
leader.Ateachlevel,thereisashortdescriptionofatypicalfirmacross12dimensions.
Table15.2.Fourlevelsofserviceperformance
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Underthemarketingfunction,welookattheroleofmarketing,competitiveappeal,
customerprofile,andservicequality.Undertheoperationsfunction,welookatthepartof
operations,servicedelivery(frontstage),backstageoperations,productivity,and
introductionofnewtechnology.Finally,underthehumanresourcesfunction,weexamine
theroleofHRM,theworkforce,andfrontlinemanagement.Obviously,thereareoverlaps
betweenthesedimensionsandacrossfunctions.Theremayalsobedifferencesinthe
relativeimportanceofsomedimensionsindifferentindustriesandacrossdifferentdelivery
systems.Thegoalistogetsomeideaofwhatneedstobechangedinfirmsthatarenot
performingaswellastheymight.
Service Losers
Thesefirmsareatthebottom.Theyfailinmarketing,operations,andhumanresource
managementalike.Customersbuyfromthembecausethereisusuallynootherchoice.This
isareasonwhyloserscontinuetosurvive.Newtechnologyisonlyintroducedunder
pressure,andtheuncaringworkforcehasanegativeimpactonperformance.TheCycleof
Failurepresentedearlierin(Figure11.6,p.328)describeshowsuchorganizationsbehavein
relationtoemployeesandwhattheconsequencesareforcustomers.
Service Nonentities
Althoughthereisstillalotofroomforimprovement,nonentitieshavegottenridofthe
worstfeaturesoflosers.AsshowninTable15.2,nonentitieshaveatraditionaloperations
mindsetwherecostsavingscanbeobtainedthroughstandardization.Theirmarketing
strategiesaresimple.Therolesofhumanresourcesandoperationscanbesummarized,
respectively,bytheidealsadequateisgoodenoughandifitaintbroke,whyfixit.
Consumersdonotseekoutnordotheyavoidsuchorganizations.Managersmaytalkabout
improvingqualityandothergoalsbutareunabletosetclearpriorities,tohaveaclear
direction,norgaintherespectandcommitmentoftheiremployees(Figure15.6).Afew
firmsmaycompeteinthiswayandyouwillfinditdifficulttotellonefromtheother.They
mayusepricediscountstotrytoattractnewcustomers.TheCycleofMediocrity(Figure
11.9,p.331)showsthehumanresourcesenvironmentofmanysuchfirmsandits
consequencesforcustomers.
Figure15.6.Employeeswillbeconfusedifthemanagersdonothavea
cleardirection.
Service Professionals
Serviceprofessionalsareinadifferentleaguefromnonentitiesandhaveaclearmarket
positioningstrategy.Customerswithinthetargetsegmentsseekoutthesefirmsbasedon
theirsustainedreputationformeetingexpectations.Marketingismoresophisticated,using
targetedcommunicationsandpricingbasedonvaluetothecustomer.Researchisusedto
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measurecustomersatisfactionandobtainideasforserviceenhancement.Operationsand
marketingworktogethertointroducenewdeliverysystemsandrecognizethetradeoff
betweenproductivityandcustomerdefinedquality.Thereareexplicitlinksbetween
backstageandfrontstageactivitiesandthefirmhasamuchmoreproactive,investment
orientedapproachtoHRM.TheCycleofSuccess(Figure11.11,p.332)highlightstheHR
strategiesthatleadtoahighlevelofperformancebymostemployeesoforganizationsin
theserviceprofessionalscategory(andbyallwhoworkforserviceleaders),togetherwith
itspositiveimpactoncustomersatisfactionandloyalty.
Service Leaders
Theseorganizationsarethebestintheirrespectiveindustries.Serviceprofessionalsare
good,butserviceleadersareoutstanding.Whenwethinkofserviceleaders,wethinkof
Starbucks,RitzCarlton,SouthwestAirlines,andIBM.Theircompanynamesarelinkedto
serviceexcellenceandanabilitytodelightcustomers.Serviceleadersareinnovativeineach
functionalareaofmanagementandalsohaveexcellentinternalcommunicationsand
coordinationamongthethreefunctions.Thisismadepossiblethrougharelativelyflat
organizationalstructureandtheuseofteamstoagreatextent.
MarketingeffortsbyserviceleadersmakeuseofCRMsystemsthatofferinsightsabout
customersonaonetoonebasis.Theyuseconcepttesting,observation,andcontactswith
leadcustomerstodevelopnewbreakthroughservicesthatrespondtopreviously
unrecognizedneeds.Operationsspecialistsworkwithtechnologyleadersaroundtheworld
todevelopnewapplicationsthatwillcreateafirstmoveradvantage.Asaresult,thefirm
canperformatlevelsthatcompetitorscannothopetoreachforalongperiodoftime.
Internally,thereareclearstandardsandstandardizedprocessesthatemployeescanfollow,
andthisfacilitatestheworkofemployees.
Seniorexecutivesseequalityoftheir
employeesasanimportantcompetitiveadvantage.HRMworkswiththemtodevelopand
maintainaserviceorientedcultureandtocreateanoutstandingworkingenvironmentthat
attractsandretainsthebestpeople(Figure15.7).Theemployeesthemselvesare
committedtothefirmsvaluesandgoals.Becausetheyareinvolved,empowered,and
quicktotakeonchange,theyareacontinuoussourceofnewideas(Figure15.8).
Figure15.7.TheBankofAmericaoffersexcellentservicestoitscustomers
andisalsooneofthebestcompaniestoworkfor.
Figure15.8.GoodHRMproducesengagedandencouragedemployeeswho
servethecompanycausebetter.
Moving to a Higher Level of Performance

Firmscanmoveupordowntheperformanceladder.Organizationsthatfocusonsatisfying
theircurrentcustomersmaymissimportantchangesinthemarketplaceandfind
themselvesturningintohasbeens.Thesebusinessesmaycontinuetoservealoyalbut
decreasinggroupofcustomers,butareunabletoattractnewconsumerswithdifferent
expectations.Companieswhoseoriginalsuccesswasbasedonaspecifictechnological
processmayfindthatcompetitorshavemanagedtofindhigherperformingalternatives.
Organizationswhosemanagementhasworkedforyearstobuildupaloyalworkforcewith
astrongserviceethicmayfindthatsuchaculturecanbequicklydestroyedasaresultofa
mergeroracquisitionthatbringsinnewleaderswithdifferentfocusorwhoemphasize
shorttermprofits.Unfortunately,seniormanagerssometimesdeceivethemselvesinto
thinkingthattheircompanieshaveachievedasuperiorlevelofperformancewhen,infact,
thefoundationsofthatsuccessarecrumbling.
LO4
Understandwhatactionsarerequiredtomoveaservicefirmfrombeingaserviceloserto
risingasaserviceleader.
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Inmostmarkets,wefindcompaniesthataremovinguptheperformanceladder.Theyput
inefforttocoordinatetheirmarketing,operations,andhumanresourcemanagement
functionsinordertogainbettercompetitivepositionsandbettersatisfytheircustomers.
Forexample,Microsofthasrecognizedthatthecustomerandpartnerexperienceis
increasinglyimportanttoearnhighlevelsofsatisfactionandloyalty.Microsofthasbeen
shiftingtheorganizationfromdevelopercentrictoamorecustomerfocusedcultureusinga
companywideinitiativecalledCustomerandPartnerExperience(CPE).CPEsobjectiveis
tomonitor,manage,andimproveeveryperceptionpointcustomersandpartnersencounter
astheytry,buy,download,use,integrate,andupgradeMicrosoftssoftware.
Leading Change toward a Higher Performance Level

Itrequireshumanleaderstotakeaservicefirmintherightdirection,settherightstrategic
priorities,andensurethattherelevantstrategiesareimplementedthroughoutthe
organization.Atransformationofanorganizationandmovingituptheperformanceladder
cantakeplaceintwodifferentways:evolutionorturnaround.
Evolutioninabusinesscontextinvolvescontinualchanges.Here,topmanagementmust
workactivelytochangethefocusandstrategyofthefirmtotakeadvantageofchanging
conditionsandnewtechnologies.Withoutacontinuingseriesofchanges,itsunlikelythata
firmcanremainsuccessfulinadynamicmarketplace.
Adifferenttypeoftransformationoccursinturnaroundsituationsinwhichleaders(usually
newones)seektobringorganizationsbackfromthebrinkoffailureandsetthemona
healthiercourse.ChanKimandReneMauborgne,bothprofessorsatINSEAD,have
identifiedfourhurdlesleadersfaceinreorientingandformulatingastrategyinturnaround
situations.
Cognitivehurdlesarepresentwhenpeoplecannotagreeonthecausesofcurrentproblems
andtheneedforchange.
Resourcehurdlesexistwhentheorganizationhaslimitedfunds.
Motivationalhurdlesexistwhenemployeesarereluctanttomakeneededchanges.
Politicalhurdlestaketheformoforganizedresistancefrompartiesthatareinterestedin
protectingtheirpositions.
Turningaroundanorganizationthathaslimitedresourcesrequiresconcentratingthose
resourceswheretheneedandthelikelypayoffsaregreatest.JohnKotter,perhapsthe
bestknownauthorityonleadership,arguesthat,inmostsuccessfulchangemanagement
processes,thoseinleadershiprolesmustgothrougheightcomplicatedandoftentime
consumingstages
1)Creatingasenseofurgencytodeveloptheincentivetochange.
2)Puttingtogetherateamstrongenoughtodirecttheprocess.
3)Creatinganappropriatevisionofwheretheorganizationneedstogo.
4)Communicatingthatnewvisionbroadly.
5)Empoweringemployeestoactonthatvision.
6)Producingsufficientshorttermresultstocreatecredibilityandcountercynicism.
7)Buildingmomentumandusingthattotacklethetougherchangeproblems.
8)Anchoringthenewbehaviorsintheorganizationalculture.
NotedauthorRosabethMossKantersuggestsitcanbeadvantageousinturnaround
situationstobringinnewCEOsfromoutsidetheorganization.
Suchindividualswould
nothavebeeninvolvedinthepreviousmanagementsdynamicsandare,therefore,ableto
identifyproblemsandchangehabits.NewCEOsmayalsohavemorecredibilityin
representingandrespectingcustomers.Exemplaryturnaroundleaders,Kantersays,
understandthepowerful,unifyingeffectoffocusingoncustomers.Thisfocuscanhelpinthe
difficulttaskofobtainingcooperationacrossdepartmentsanddivisions.Inadditionto
breakingdownbarriersbetweenmarketing,operations,andhumanresourcesorbetween
variousproductorgeographicdivisions,turnaroundCEOsmayalsoneedtorelookat
financialprioritiestoenablecollaborativegroupstotacklenewbusinessopportunities
(Figure15.9).
Figure15.9.Acompanyculturecanbedynamicwhenleadershipand
managementskillsworkinhandinglove.
Leadership, Organizational Culture, and Climate

Sofar,wehavediscussedhowwecanmoveafirmfromaservicelosertoaserviceleader.
Toclosethischapter,wetakeabrieflookatathemethatrunsthroughoutthebook:the
10
leadersroleinnurturinganeffectiveculturewithinthefirm. Organizationalculturecanbe
definedasincluding:
LO5
Discusstheroleofleadersinnurturinganeffectiveserviceculture.
Sharedperceptionsorthemesregardingwhatisimportantintheorganization.
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Sharedvaluesaboutwhatisrightandwrong.
Sharedunderstandingaboutwhatworksandwhatdoesntwork.
Sharedbeliefsandassumptionsaboutwhythesebeliefsareimportant.
Sharedstylesofworkingandrelatingtoothers.
Aserviceorientedcultureincludeshavingclearmarketinggoalsandastrongdrivetobe
11
thebestindeliveringsuperiorvalueorservicequality. Oncethevaluesoftheorganization
arepartoftheheartsandmindsofitsemployees,theycanworkindependentlyandyetbe
collaborative,astheyareallthinkingwiththemissionandgoalsintheirmindswhen
12
makingdecisions.
Transforminganorganizationtodevelopandnurtureanewculturealongeachofthesefive
dimensionsisnoeasytaskforeventhemostgiftedleader.Itisevenmoredifficultwhen
theorganizationispartofanindustrythatpridesitselfondeeplyrootedtraditions,including
manydifferentdepartmentsrunbyindependentmindedprofessionalsindifferentfieldswho
areverysensitivetohowtheyareperceivedbyfellowprofessionalsinthesamefieldat
otherinstitutions.Thissituationoftenisfoundinsuchpillarsofthenonprofitworldas
collegesanduniversities,majorhospitals,andlargemuseums.ServiceInsights15.2
describesthechallengesfacedbyanewdirectorintransformingBostonsMuseumofFine
Artsatalowpointinitshistory.
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ServiceInsights15.2:ReversingCourseattheMuseumof
FineArts,Boston
BostonshighlyrespectedMuseumofFineArts,foundedin1870,hadbeen
goingdownhillforseveralyearswhentheboardrecruitedanewdirectorin
June1994.TheirchoicewasArtHistorianMalcolmRogers,thenDeputy
DirectoroftheNationalPortraitGalleryinLondon.ArrivinginBoston,Rogers
foundaninstitutionfacingfinancialdifficultiesandlowstaffmoralefrom
recentstaffcutbacks.Corporatemembershipshadslumped,andattendance
haddeclined.
Oneofthenewdirectorsfirstactswastohostabreakfastfortheentirestaff
andintroducewhatwouldbecomeacentraltheme:
Weareonemuseum,notacollectionofdepartments.Themuseumconsists
ofsecurityguards,curators,technicians,benefactors,volunteers,public
relationspersonnel.Weallhaveourindividualprofessionalexpertise.By
workingcooperativelywithcolleagues,weallhaveareasthatcanbe
improved.
Rogersonemuseumtheme,repeatedregularly,sentthemessagethat
operatingasonemuseumismoreimportantthanhavingtraditionally
independentcuratorswhooperatedthemuseumsmanydifferentart
departmentsandsetprioritiesforacquisitionsandexhibitions.Onecurator
quicklyresigned.Whilehewasrecognizedforhisgoodhumorandfriendly,
outgoingmanner,thenewdirectorshowedthathecouldbebluntand
decisive.Hewasverytoughwithexpendituresandbeganaprogramtocut
staffsizeby20%.However,hiscutbacksdidnotextendtoservicesfor
museumvisitors.Instead,hesetaboutcreatingamorewelcoming
environment.SaidRogers:
Imfirmlycommittedtotheideathatmuseumsareheretoservethe
community,andthatsgoingtobeoneofthekeynotesofmyworkherein
BostontoencouragetheMFAtoturnouttowarditspublicandtosatisfyas
broadaconstituencyaspossible.
HesoonreopenedthemainentranceonHuntingtonAvenue,whichhad
beenclosedtosavemoney,andreversedthetrendofshorteningopening
hours,anotherofhispredecessorscostcuttinginitiatives.Dailyschedules
wereextendedandsevendayoperationsstarted.Threenightsaweek,the
museumremainedopenuntil10p.m.OnCommunityDays,threeSundays
ayear,theMFAwasopentothepublicfreeofcharge.
Eachsuccessiveyear,Rogerslaunchedactivitiestoimprovethemuseums
facilitiesandimage,includingnewexteriorlightingtobetterdisplaythe
MFAsimposingfacadeatnight,expandingthemainrestaurant,and
openinganewrooftopterrace.MakingtheMFAaneveningdestination,
especiallyforpeoplelivinginorclosetothecity,wasanotherobjective.The
broadervarietyofexhibitions(toencouragemultiplevisitsperyear),
upgradedrestaurants,andimprovedmuseumatmosphereallplayedarole.
Anambitious$500millioncapitalcampaignwaslaunched,partofwhich
wouldfundconstructionofamajorbuildingexpansion.
Externally,Rogersenjoyedamuchhigherpublicprofilethanhis
predecessors.SaidPatJacoby,thenthedeputydirectorofmarketingand
development:Malcolmpersonifiesmarketing:Hesaccessible,hesan
advocateofPR,hecaresaboutthevisitors,andhebelievestheMFAcanset
thestandardforothermuseums.Rogersdeclared:
Marketingiscentraltothelifeofagreatmuseumthatstryingtogetits
messageout.Itspartofoureducationaloutreach,oursocialoutreach.
Unfortunately,certainpeopledontlikethewordmarketing.WhatIseeout
thereandalsotoacertainextentinsidethemuseumisaveryconservative
culturethatcannotacceptthatinstitutionspreviouslyconsideredeliteshould
actuallybetryingtoattractabroaderpublicandalsolisteningtowhatthe
publicissaying.Butitsalltodowithfulfillingyourmission.
Clearlypartofamuseumsmissionisguardianshipofpreciousobjects,but
unlesswerecommunicatingthoseobjectstopeopleeffectivelyandour
visitorsareenjoyingthemandtheambienceofthesettinginwhichtheyare
displayedandinterpretedthenwereonlyoperatingat50%effectivenessor
less.Havingsaidthis,Iwanttostressthatthemissioncomesfirstandthat
marketingisabsolutelytheservantofourmission.Werenotjustinthe
businessoffindingoutwhatpeoplewantandthengivingittothem.
Rogerssoughttopickamixofexhibitionsthatcombinedhighscholarly
contentwithpopularappeal.Hisview,sharedbytheseniorstaffand
supportedbytheboard,wasthatoneshowinfiveshouldbeofa
blockbusternature,whichmeanthostingsuchanexhibitionatleastonce
everytwoyears.HealsosoughttodisplayartfromtheMFAspermanent
collectiontobestadvantage,includingsmallrevolvingshows.Paintingsin
the15Europeangallerieswererehungininnovativewaysdesignedto
stimulatetheaudienceandengagethemmoreactively.However,therewas
muchcriticismamongtheartcommunitywhen27Impressionistpaintings
fromtheMFAscelebratedMonetcollectionwereloaned(forareported$1
millionfee)toagalleryattheBellagiocasinoinLasVegas,wheretheywere
seenby450,000visitors.
In2002,theMFAboardadoptedalongtermstrategicplan,titledOne
MuseumGreatMuseumYourMuseum.Itwasorganizedaround10
strategicgoals(Table15.3),eachsupportedbyasetofinitiativesandover
200detailedactionplans.
Table15.3.TenstrategicgoalsfortheMFA
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Bymid2006,manyoftheseinitiativeswerewellunderway.Thefundraising
driveforthenewextensionhadpassed$335millionmark.Attendancehad
beguntogrowagain,afterslumpingnationwidefollowing9/11.TheMFA
continueditsstrategyofperiodicallyexhibitingnontraditionalartformsand
artcollections,includingSpeed,StyleandBeauty:CarsfromtheRalph
LaurenCollection,featuring16classicEuropeancarsownedbythefashion
designer.Rogersarguedthatthesevehicleswereasmuchworksofartas
furniture,longanacceptedcomponentofmanyartmuseumscollections.
DespitesuchcriticismsastheNewYorkTimesreviewheadlinedArtwith
LousyMileagebutShinyCelebrityGloss,attendanceexceededitsgoalsand
metanimportantobjectiveofattractingamuchhigherproportionofmale
visitorsthanusuallycametothemuseum.
Sources:ChristopherLovelock,MuseumofFineArts,Boston,Services
Marketing,4thed.UpperSaddleRiver,NJ:PrenticeHall,2001,625638
V.KasturiRanganandMarieBell,MuseumofFineArtsBoston,
HarvardBusinessSchoolCase9506027MuseumofFineArtswebsite,
www.mfa.org(http://www.mfa.org) ,accessedMarch12,2012.
Whilecultureismoreoverarchingandlessmeasurable,organizationalclimateisthepartof
theorganizationsculturethatcanbefeltandseen.Itisculturetranslatedintomore
concreteaspectsthatcanbeexperiencedbytheemployees.Sixkeyfactorsthatinfluencean
organizationsworkingclimateare:
Itsflexibility(howfreeemployeesfeeltoinnovate).
Employeessenseofresponsibilitytotheorganization.
Thelevelofstandardsthatpeopleset.
Theperceivedsuitabilityofrewards.
Theclaritypeoplehaveaboutmissionandvalues.
13
Thelevelofcommitmenttoacommonpurpose.
Fromanemployeesperspective,thisclimateisdirectlyrelatedtomanagerialpoliciesand
procedures,especiallythoselinkedtohumanresourcemanagement.Inshort,climate
representsthesharedviewsofemployeesaboutthepractices,procedures,andtypesof
behaviorsthatgetrewardedandsupportedinaparticularsetting.
Manyclimatesoftenexistatthesametimewithinasingleorganization.Aclimatemust
relatetosomethingspecific,forinstance,service,support,innovation,orsafety.Aclimate
forservicereferstoemployeeviewsofthepractices,procedures,andbehaviorsrelatedto
customerserviceandservicequalitythatareexpectedandthatgetrewardedwhen
performedwell.
Leadersareresponsibleforcreatingculturesandtheserviceclimatesthatgoalongwith
them.Whyaresomeleadersmoreeffectivethanothersinbringingaboutadesiredchange
inclimate?AspresentedinServiceInsights15.3,researchsuggeststhatitmaybeamatter
ofleadershipstyle.
Creatinganewclimateforservice,basedonanunderstandingofwhatisneededformarket
success,mayrequireacompleterethinkofhumanresourcemanagementactivities,
operationalprocedures,andthefirmsrewardandrecognitionpolicies.
14
Leadership in the Future
Whataresomeaspectsofleadershipthatwillbedifferentfromwhatweareusedtotoday?
Therearetwomaininterlinkedaspectsofleadershipthatarelikelytobecomemore
important.Theyarecollectivegeniusandleadershipfrombehind.Manyofthepeople
workinginteams,whichformcollectivegenius,arestarsintheirownright.Inordertolead
themeffectively,theirleaderneedstotakeabackseatandletdifferentmembersleadat
differentpoints(Figure15.10).
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Figure15.10.Whenleaderscaneffectivelycommunicateaclearand
excitingvisionforthefuture,peoplelistenandfollowattentively.
LO6
Describethequalitiesofleadersofthefuture.
ServiceInsights15.3:TheImpactofLeadershipStyleson
Climate
DanielGoleman,anappliedpsychologistatRutgersUniversity,identifiedsix
stylesofleadership.Heinvestigatedhowsuccessfuleachstylehasprovento
beinaffectingclimateorworkingatmosphere.Thiswasbasedonamajor
studyofthebehaviorandimpactontheirorganizationsonthousandsof
executives.
Coerciveleadersdemandimmediateobedience(DowhatItellyou).They
werefoundtohaveanegativeimpactonclimate.Golemancommentsthat
thiscontrollingstyleisusefulonlyinacrisisorindealingwithproblem
employees.Pacesettingleaderssethighstandardsforperformance.Theyare
veryenergetic.ThisstylecanbesummarizedasDoasIdo,now.Thisstyle,
too,wasfoundtohaveanegativeimpactonclimate.Inpractice,the
pacesettingleadermaydestroymoralebyassumingtoomuch,toosoon,of
subordinatesexpectingthemtoknowalreadywhattodoandhowtodoit.
Whenothersturnouttobelesscapablethanexpected,theleadermaystart
focusingondetailsandmicromanaging.Thisstyleislikelytoworkonlywhen
seekingtogetquickresultsfromahighlymotivated,skilfulandexperienced
team.
Theresearchfoundthatthemosteffectivestyleforachievingapositive
changeinclimatecamefromauthoritativeleaderswhohavetheskillsand
personalitytomovepeopletowardavision.Theseleadersbuildconfidence
usingaComewithmeapproach.Theresearchalsofoundthatthreeother
styleshadquitepositiveimpactsonclimate:affiliativeleaderswhobelieve
thatPeoplecomefirst,seekingtocreateharmonyandbuildemotional
bondsdemocraticleaderswholookedforagreementthroughparticipation
(Whatdoyouthink?)andcoachingleaderswhoworktodeveloppeoplefor
thefutureandwhosestylemightbesummarizedasTrythis.
Source:DanielGoleman,LeadershipthatGetsResults,Harvard
BusinessReview78,MarchApril2000,7893.
Collective Genius
Traditionally,leaderssetacourseandinspirepeopletofollow.Inthefuture,becauseof
businessdiversityandinterdependencebetweenvariousparties,theleadershipstyleneeds
tobemorecollaborativeanduseateamapproachtoproblemsolving.Infact,thereare
manyknowledgeableandtalentedpeoplewhowillnotfollowifleadersleadfromthe
positionofauthority.Instead,wehaveaprocessofcollectivegenius.
Increasingly,leaderswillcomefromemergingcountrieswithverydifferentstylesbecause
theycomefromdifferentcultures.Forexample,inAfrica,leadershipisoftenbasedonthe
principleofIambecauseweare.HCLTechnologies,anIndianinformationtechnology
companythatisoftensaidtohavetheworldsmostmodernmanagement,emphasizesthat
theemployeeisfirst,andthecustomerissecond.Thecompanyusesamodelofdistributed
leadership,whereleadersofvariousgroupsshareleadershipwiththeCEO.Again,this
emphasizesthenotionofleadershipusingcollectivegenius,whichisteambasedinnature.
Leadership from Behind

Leadershipfrombehindisonewheretheleaderisnotafraidofsharingpowerwithothers.
Theseleaderscreateanenvironmentwheretheiremployeesarewillingtostepforward
andlead,anddifferentpeoplecanbeleadingatdifferentpointsoftimedependingontheir
expertiseandskillsets.Leadershipthenbecomesacollectiveactivity(Figure15.11).If
necessary,theleaderwhogenerallyleadsfrombehindcanalsostepforwardandleadfrom
thefront,ifneeded,suchasinmomentsofcrises.
Figure15.11.Intheglobalcommercialmeltingpot,innovativeleadership
caninspireadiverseteamoftalentintoachievingfarmorethanindividual
effort.
Inthefuture,innovationwillremainkeyfororganizationstosucceedandbecomemore
importantascompetitiveintensityincreases.Innovationcallsforleadingfrombehind,asit
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isacreativeprocessthatrequirestakingfulladvantageofthetalentsofadiversegroupof
people.Thisgroupofpeoplewillseethattheircollectiveeffortscanyieldresultsthatarefar
superiortotheirindividualefforts.
Chapter Summary
LO1TheServiceProfitChainshowsthatserviceleadershipinanindustry
requireshighperformanceinseveralrelatedareas:
Customerrelationshipsmustbemanagedeffectivelyandtheremustbestrategiestobuild
andsustainloyalty.
Valuemustbecreatedanddeliveredtothetargetcustomersinwaysthatleadthemto
seethefirmsofferingassuperiortocompetingofferings.
Servicequalityandproductivitymustbecontinuouslyimproved.
Serviceemployeesmustbeenabledandmotivated.
Topmanagementsleadershipneedstodriveandsupportallthecomponentsofthe
ServiceProfitChain.
LO2Tobesuccessful,themarketing,operations,andhumanresource
managementfunctionsneedtobetightlyintegratedandworkcloselytogetherinwell
coordinatedways.
Integrationmeansthatthekeydeliverablesandobjectivesofthevariousfunctionsarenot
onlycompatiblebutalsomutuallyreinforcing.
Waystoimproveintegrationinclude(1)internaltransfersacrossfunctionalareas,(2)
crossfunctionalprojectteams,(3)crossfunctionalservicedeliveryteams,(4)appointing
individualstointegrateobjectives,activities,andprocessesbetweendepartments,(5)
internalmarketingandtraining,and(6)managementcommitmentthatensuresthe
overarchingobjectivesofallfunctionsareintegrated.
LO3Therearefourlevelsofserviceperformance,andonlythelasttwofollow
theServiceProfitChainsprinciples:
Servicelosers.Theyfollowthecycleoffailureandarepoorperformersinmarketing,
operations,andHRM.Serviceloserssurvivebecausemonopolysituationsgivecustomers
littlechoicebuttobuyfromthem.
Servicenonentities.Theirperformancestillleavesmuchtobedesired,buttheyhave
eliminatedtheworstfeaturesoflosers.Theytypicallyfunctioninthecycleofmediocrity.
Serviceprofessionals.Theyhaveaclearmarketposition,andcustomersintarget
segmentsseekthemoutbasedontheirsustainedreputationformeetingexpectations.
Theytypicallyfunctioninthecycleofsuccess.
Serviceleaders.Theyarethecrmedelacrmeoftheirrespectiveindustries.They
typicallyperfectandinternalizethecycleofsuccessfortheirservicebusiness.
Wecontrastedthedescriptionandactionsofaserviceleaderagainstprofessionals,
nonentities,andlosersalongthethreefunctionalareasinTable15.2(pp.482483).
LO4Companiesthatareabletomoveuptheperformanceladdertypicallyputin
efforttocoordinatetheirmarketing,operations,andhumanresourcemanagement
functionsinordertogainbettercompetitivepositionsandtobettersatisfytheircustomers.
Noorganizationcanhopetomoveuptheperformanceladderandachieveenduring
successwithoutchange,whichcanbeintheformofevolutionarychangeorturnaround
change.Evolutionarychangeinvolvesmakingaseriesofchangesasthefirmfacesa
dynamicmarketplace.Turnaroundchangesofteninvolvebringinganewleadertobringthe
organizationbackfromthebrinkoffailure.
Toovercomebarriersforchange,leadershipmustnavigatethrougheightstagesfor
successfulchangemanagement.
Creatingasenseofurgencytodeveloptheincentivetochange.
Puttingtogetherateamstrongenoughtodirecttheprocess.
Creatinganappropriatevisionofwheretheorganizationneedstogo.
Communicatingthatnewvisionbroadly.
Empoweringemployeestoactonthatvision.
Producingsufficientshorttermresultstocreatecredibilityandcountercynicism.
Buildingmomentumandusingthattotackletougherchangeproblems.
Anchoringthenewbehaviorsintheorganizationalculture.
LO5Exemplaryleadersunderstandthepowerful,unifyingeffectoffocusingon
customersandcreatingacultureforservice.Itis,therefore,animportantroleofleadersto
developastrongorganizationalculturesothatitsemployeeshaveshared:
Perceptionsofwhatisimportanttothecompanyandwhyitisimportant.
Valuesaboutwhatisrightandwrong.
Understandingofwhatworksandwhatdoesnot.
Beliefsandassumptionsaboutwhythesebeliefsareimportant.
Sharedstylesofworkingandrelatingtoothers.
Organizationalclimateistheaspectoforganizationalculturethatisexperiencedby
employees,andmeasurable.Manyclimatesoftenexistatthesametimewithinasingle
organization.Amongsixkeyfactorsthatinfluenceanorganizationsworkingclimateare:
Itsflexibility(howfreeemployeesfeeltoinnovate).
Theirsenseofresponsibilitytotheorganization.
Thelevelofstandardsthatpeopleset.
Theperceivedsuitabilityofrewards.
Theclaritypeoplehaveaboutmissionandvalues.
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09/09/2015
Thelevelofcommitmenttoacommonpurpose.
LO6Collectivegeniusandleadershipfrombehindaretwomaintrendsthatwill
becomeimportantinleadershipoftomorrow.Manyofthepeoplewhoworkinteamsthat
formcollectivegenius,arestarsintheirownright.Inordertoleadthemeffectively,the
leaderneedstoleadfrombehindandletdifferentmembersleadatdifferentpoints.
Leadershipfrombehindtakesadvantageofthetalentsofadiversegroupofpeople,yielding
farsuperiorresultsthanindividualefforts.
Unlock Your Learning
ThesekeywordsarefoundwithinthesectionsofeachLearningObjective(LO).Theyare
integraltounderstandingtheservicesmarketingconceptstaughtineachsection.Havinga
firmgraspofthesekeywordsandhowtheyareusedisessentialtohelpingyoudowellon
yourcourse,andintherealandverycompetitivemarketingsceneoutthere.
LO11Customerloyalty
2Customersatisfaction
3Productiveemployees
4Profitability
5ServiceProfitChain
6Shareholdervalue
7Topmanagementleadership
LO28Crossfunctionalprojectteams
9Humanresourcefunction
10Interfunctionalconflict
11Internaltransfers
12Marketingfunction
13Operationsfunction
LO314Serviceleaders
15Servicelosers
16Servicenonentities
17Serviceperformance
18Serviceprofessionals
LO419Cognitivehurdles
20Evolution
21Leadershiproles
22Motivationalhurdles
23Performanceladder
24Performancelevel
25Politicalhurdles
26Resourcehurdles
27Turnaround
LO528Affiliativeleaders
29Authoritativeleaders
30Coerciveleaders
31Organizationalclimate
32Organizationalculture
33Pacesettingleaders
34Serviceorientedculture
Howwelldoyouknowthelanguageofservicesmarketing?Quizyourself!
Notfortheacademicallyfaintofheart
Foreachkeywordyouareabletorecallwithoutreferringtoearlierpages,give
yourselfapoint(andapatontheback).Tallyyourscoreattheendandseeifyou
earnedtherighttobecalledaservicesmarketeer.
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09/09/2015
Score
06ServicesMarketingisdoneagreatdisservice.
713Themidnightoilneedstobelit,pronto.
1419Iknowwhatyoudidntdoallsemester.
2025ByGeorge!Youregettingthere.
2631Now,goforthandmarket.
3234Thereshouldbeamarketingconceptnamedafteryou.
KnowYourESM
ReviewQuestions
1.WhataretheimplicationsoftheServiceProfitChainforservice
management?
2.SupportersoftheServiceProfitChainarguethatstronglinksconnect
employeesatisfactionandloyalty,servicequalityandproductivity,value,and
customersatisfactionandloyalty.Doyouthinkthesesamerelationships
wouldprevailinlowcontactenvironmentsinwhichcustomersuseselfservice
technology?Whyorwhynot?
3.Whydothemarketing,operations,andhumanresourcemanagement
functionsneedtobecloselycoordinatedinserviceorganizations?
4.Whatarethecausesoftensionamongthemarketing,operations,and
humanresourcefunctions?Providespecificexamplesofhowthesetensions
mightvaryfromoneserviceindustrytoanother.
5.Howarethefourlevelsofserviceperformancedefined?Basedonyour
ownserviceexperiences,provideanexampleofacompanyforeachcategory.
6.Exemplaryturnaroundleadersunderstandthepowerful,unifyingeffectof
focusingoncustomers.Commentonthisstatement.Isfocusingoncustomers
morelikelytohaveaunifyingeffectwithinacompanyunderturnaround
conditionsthanatothertimes?
7.Whatistherelationshipamongleadership,climate,andculture?
8.Whatkindofqualitieswillbemorecommoninleadersofthefuture?
Explainwhythesequalitiesarenecessary.
WorkYourESM
ApplicationExercises
1.AnalyzeaservicefirmalongthekeyaspectsoftheServiceProfitChain.
Assesshowwellthefirmisperformingatthevariouscomponentsofthe
ServiceProfitChain,andmakespecificsuggestionsforimprovements.
2.Contrasttherolesofmarketing,operations,andhumanresourcesin(1)a
gasstationchain,(2)awebbasedbrokeragefirm,and(3)aninsurance
company.
3.Selectacompanyyouknowwell,andobtainadditionalinformationfroma
literaturereview,website,companypublication,blog,andsoon.Evaluate
thecompanyonasmanydimensionsofserviceperformanceasyoucan,
identifyingwhereyoubelieveitfitsontheserviceperformancespectrum
showninTable15.2.
4.Whatistheroleofseniormanagementinmovingafirmtoward
consistentlydeliveringserviceexcellence?
5.Basedonallyouvelearnedworkingthroughoutthisbook,whatdoyou
believearethekeydriversofsuccessforserviceorganizations?Tryand
developanintegrativecausalmodelthatexplainstheimportantdriversof
successforaserviceorganization.
Endnotes
1 .DonPeppersandMarthaRogers,ReturnonCustomer.NewYork:Currency
Doubleday,2005,1.
2 .JamesL.Heskett,ThomasO.Jones,GaryW.Loveman,W.EarlSasserJr.,and
LeonardA.Schlesinger,PuttingtheServiceProfitChaintoWork,HarvardBusiness
Review72,March/April1994JamesL.Heskett,W.EarlSasser,Jr.,andLeonardA.
Schlesinger,TheServiceProfitChain.NewYork:TheFreePress,1997.
3 .SandraVandermerwe,FromTinSoldierstoRussianDolls.Oxford:Butterworth
Heinemann,1993,82.
4 .RobertJ.KwortnikJr.andGaryM.Thompson,UnifyingServiceMarketingand
OperationsWithServiceExperienceManagement,JournalofServiceResearch11,no.4
(2009):389406.
5 .RichardB.ChaseandRobertH.Hayes,BeefingUpOperationsinServiceFirms,
SloanManagementReview,(Fall1991):1526.
6 .RosabethMossKanter,TransformingGiants,HarvardBusinessReview,(January
2008):4352.
7 .W.ChanKimandReneMauborgne,TippingPointLeadership,HarvardBusiness
Review81,(April2003):6169.
8 .JohnP.Kotter,WhatLeadersReallyDo.Boston:HarvardBusinessSchoolPress,
1999,1011.
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9 .RosabethMossKanter,LeadershipandthePsychologyofTurnaround,Harvard
BusinessReview81,(June2003):5867.
10.Thissectionisbased,inpart,onBenjaminSchneiderandDavidE.Bowen,Winningthe
ServiceGame.Boston:HarvardBusinessSchoolPress,1995DavidE.Bowen,Benjamin
Schneider,andSandraS.Kim,ShapingServiceCulturesthroughStrategicHumanResource
Management,inT.SchwartzandD.Iacobucci,eds.,HandbookofServicesMarketingand
Management.ThousandOaks,(CA:SagePublications,2000,439454.)
11.HansKasper,CultureandLeadershipinMarketOrientedServiceOrganisations,
EuropeanJournalofMarketing36,no.9/10(2002):10471057.
12.RosabethMossKanter,TransformingGiants,HarvardBusinessReview(January
2008):4352
13.DanielGoleman,LeadershipThatGetsResults,HarvardBusinessReview78,
(MarchApril,2000):7893.
14.LindaA.Hill,WhereWillWeFindTomorrowsLeaders?HarvardBusinessReview,
(January2008):123129.
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Essentials of Services Marketing, Second Edition

Chapter 14. Impro...

Part VI: Cases

Chapter 15. Organizing for Service Leadership

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The Service Profit Chain

Important Links in the Service Profit Chain

Getting the Service Profit Chain Right Creates Shareholder Value

Integrating Marketing, Operations, and Human Resources

How Are Marketing, Operations, and Human Resources Linked?

Do We Need Additional Skill Sets besides Marketing, Operations, and Human

Creating a Leading Service Organization

From Losers to Leaders: Four Levels of Service Performance

Moving to a Higher Level of Performance

Leading Change toward a Higher Performance Level

Leadership, Organizational Culture, and Climate

Leadership in the Future

Leadership from Behind

Unlock Your Learning

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