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Service management. Unit 3Mieke de Droog, M.A. 20 April 2011

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Why does the management of services deserve special attention?

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1. They have characteristics that lead to special challenges for management.

2. The importance of services in the economics has increased in the last decennia.

3. A lot of services developed into huge companies.

The management of services deserves special attention because

Van der AA & Elfring, 2003: 1

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Why has the importance of strategic management increased in service companies?

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The importance of strategic management increased in service companies because

1. service companies changed into huge companies due to big changes

2. international competition increased3. privatization of public services (e.g. WEB, SETAR)4. liberalization of markets5. innovations related to information technology (IT)

Van der AA & Elfring, 2003: 3

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Why are management issues for service companies different from other companies?

The management issues for service companies are related with the characteristics of services.

Van der AA & Elfring, 2003: 3

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What are specific dimensions for the quality of services?

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Some specific dimensions for the quality of services are

1. Relatively difficult to determine what customers can expect from a service provider.

2. Relatively difficult to determine what the specifications and quality standards should be.

3. The client becomes more critical towards the quality of services

4. The options of service have increased5. The client has become more critical

Van der AA & Elfring, 2003: 4

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There are different strategies to work towards an integrated policy to obtain a good quality of service

• Defensive: In response to management problems Management focus is on cost reduction

• Offensive: make use of the moment of interaction

Van der AA & Elfring, 2003: 5

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Een dienst is een activiteit of een serie activiteiten die min of meer ontastbaar zijn, die meestal geproduceerd worden in interactie tussen klant en dienstverlenend bedrijf door middel van medewerkers, apparatuur en/of systemen (Grönroos, 2000 in Van der AA & Elfring, 2003:11).

Definition of service

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Goods Services1.Tangible things 1. Intangible processes /

activities2. Customers do not contribute to the production

2. Customers are co- producers

3.Production and consumption separately

3. Bound by time and place, production and consumption at the same time

4. Homogeneity in products / processes

4. Heterogeneity in processes and results

5. Direct contacts between producer and customer are possible

Direct contacts are mostly necessary (person intensity)

Table 2.1 Goods and services differ from a management perspective

Sources: Norman (2000), and others, in Van de Aa & Elfring, 2003: 12

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Analysis of basic characteristics of services are useful for strategic analysis

Two models explained by van der AA & Elfring:

1. Service process matrix, Schmenner, 1986

2. Positioning and nature of the service, Lovelock, 1992

Van der AA & Elfring, 2003: 25-29

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Service process matrix, Schmenner, 1986

A little interaction A little customization

Much interactionMuch customization

Capital intensive.

Segment 1Service factory (transport/hotel)

Segment 2Service store (hospital)

Labor intensive. Segment 3Mass service (schools)

Segment 4Professional service (doctors)

Table 2.3 Services classified by labor intensity and possibilities for customer interaction and customization in from der Aa & Elfring, 2003: 25

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Positioning and nature of the service. Lovelock, 1992Service oriented

on peopleService oriented on things

Tangible activities & Results

Transport of persons, Health careSports centreRestaurant

Transport of freightMaintenanceReparationCleaning

Intangible activities & Results

EducationMedia: television, radioTheaterInformation services

Bank servicesJudicial servicesAccountants servicesAssurance

Table 2.5 Positioning en nature of service in from der Aa & Elfring, 2003: 29

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Basic characteristics of services

Issues for management

1.Intangibility; Controlling / reducing uncertainties of the client.. Copying of innovations by competitors.

2.Customer interaction Client is co-producer and affects quality and efficiency.Product and process are difficult to separate.

3.Bound to time and place Occupancy rate of capacityDistributed production, growth in multiple locations

4.Heterogeneity Reliability of serviceRealization of learning and scale benefits

5.Person intensity Great sensitivity for quality of role employees(Labor-) productivity

Table 2.6 Basic characteristics of service and related issues in from der Aa & Elfring, 2003: 30

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What do you think are similarities/differences in service in the public and private sector ?

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1. What are the 4 steps for successful service mentioned in the video?

2. Do you think they are also applicable in public service?

Fish; 10 minutes

Four steps1.Play2.Make their day3.Be there4.Choose your

attitude

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What does the literature say?

Chapter 2. Clients in the public sector

“…. the ‘ customer service” movement has swept the Western world, but there simply has been little careful thought about who government’s customers are, how government activities can be restructured to advance customer service, how to balance the often conflicting expectations of government’s multiple customers, and what other goals might be sacrificed in the process.” Kettl, 1996

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Who are government ‘s customers?

In Alford, 2009: 31

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“‘ The archetypal transaction in the private sector is the market exchange between a customer and a private firm. In this exchange , which is both direct and voluntary, the customer provides money in return for goods or services. Each therefore gains private value, which they can appropriate and consume themselves, in a ‘value-creating process’ “ Kotler, 1980

In Alford, 2009: 32

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Some of the transactions between government organizations and members of the public conform to this ideal –type. For example, public transport passengers or postal service users pay money and receive service in return. ……..But closer examination reveals that there is more to their transactions than the private sector model encompasses. …….‘Paying customer’ is not the only relationship which members of the public have with the transit authority. Alford, 2009: 32

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Members of the public receive not only private value from governmental organizations, but also public value.(e.g. equity)

.”In this context, ‘the public’ is not an aggregation of individuals but a collectivity, in which they take part as citizens (Stewart and Ranson,1988 e.a.)

In Alford, 2009: 32-33

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…. The public service consumer is also (nearly always) a citizen. It is a concept with a strong connotation of collective rather than individual action (‘Fellow citizens!’). Citizens owe duties and possess rights of the state. All this is alien to an individualist model where the market is the chief focus of transactions and values………… (Pollitt, 1990)

In Alford, 2009: 33

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It is the citizen who ultimately determines, through the aforementioned political process, how much tax will be paid by whom, and what public value will be provided in return for it. These basic decisions are analogous to those made by customers in the private sector market exchanges. Accordingly, the citizenry is the key shaper and ‘consumer’ of public value.

Alford, 2009: 34

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Table 2.1.

Alford, 2009: 36

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Although economic exchange is of limited validity in dealings between public sector agencies and their public, social exchange offers a useful way of thinking about them (Ekeh, 1974, Turner ,1982)

In Alford, 2009: 37

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Figure 2.1.

Alford, 2009: 41

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Figure 2.2.

Alford, 2009: 44

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To secure their compliance with the rules, schools can apply coercive powers, such as detentions, suspensions or ultimately expulsions. But it can also seek to understand the factors that make it difficult for some students to comply- such as attention deficit disorder or family dysfunction – and by addressing them, for example with medical advice or social work interventions, try to make it easier for students as expected. In other words, it also elicits compliance from its beneficiaries/obligates by treating them like customers.

Alford, 2009: 45

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Is it possible to apply the private customer model to government organizations?

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Is it possible to apply the private customer model to government organizations?

Strictly speaking no, because often there is no voluntary exchange of money for goods or services

“ But by broadening the range of values which might be exchanged, and the set of possible parties to that exchange, it is possible to make sense of relations between government agencies and the members of the public with whom they deal in terms of exchange, and thereby enable a more precise definition of client co-production. The range of values includes not only private values but also public ones, and not only economic but also normative and symbolic ones”. Alford, 2009: 48-49

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When is encouraging client co-production appropriate?

1. When service production and delivery are absolutely inseparable (e.g. student, prisoner)

2. When clients can supplement, or substitute for, the labor and information provided by employees (e.g. tax office)

3. When clients have the abilities necessary to perform their roles (e.g. make use of internet)

Alford, 2009: 47

What motivates customers?1. When clients see that there is

something in for them- some kind of reward (extrinsic/intrinsic (the sheer enjoyment of the service experience)

2. By making it easier for clients to co-produce, both by reducing the complexity of the task and by enhancing the client’s capacities to perform it.

33In Alford, 2009: 48

Is it important to look at the role of public sector clients as co-producers?

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“However, the focus on public sector clients so far had effectively ignored their role as co-producers. Consequently, it exhibits the same gap observed in the more general co-production experience: a neglect of clients as co-producers.

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Alford, 2009: 32

Assignments:

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Reminder: D2. Answer the reading questions of unit 4. Chapter 3. Gastelaars (2009) and send them via email to [email protected], [email protected] and [email protected]

Before 21 April 1.00 pm

www.ogm-clientbased-thinking.wikispaces.com

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Questions?

Thank you for your attention and

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