Download Summary – Chapter 15 (1)

Chapter 15
Organizing for
Change Management
and Service
Leadership
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 1
Learning Objectives - Chapter 15
 Uncover the implications of the service-profit chain for
service management
 Examine how marketing, operations and human resource
management need to be integrated in a service business
 Explore the distinction between evolutionary change and
turnaround
 Establish the role service leaders play in fostering success
 Determine actions required to move a firm toward status of
world class service delivery
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 2
Effective Marketing Lies at the Heart
of Value Creation
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 3
The Service-Profit Chain
(Fig 15.1)
Internal
External
Operating strategy and
service delivery system
Loyalty
Service
Concept
Target Market
4-7
Customers
Satisfaction
Productivity
and
Employees
Output
Quality
Capability
Revenue
growth
Service
Value
3
Satisfaction
2
Loyalty
1
Profitability
Service
Quality
• Workplace design
• Job design
• Selection and development
• Rewards and recognition
• Information and communication
• Tools for serving customers
Quality and
• Attractive value
productivity
• Service designed
Improvements
and delivered to
yield higher
meet targeted
service quality
customers’ needs
and lower costs
• Lifetime value
• Retention
• Repeat business
• Referral
Source: See Services Marketing textbook, page 436, for full source information.
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 4
Links in the Service-Profit Chain
Table 15.1
1. Customer loyalty drives profitability and growth
2. Customer satisfaction drives customer loyalty
3. Value drives customer satisfaction
4. Employee productivity and retention drive value
5. Employee loyalty drives productivity
6. Employee satisfaction drives loyalty and
productivity
7. Internal quality drives employee satisfaction
8. Top management leadership underlies chain’s
success
Source: See Services Marketing textbook, page 437, for full source information.
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 5
Qualities Associated with
Service Leaders
 Understands mutual dependency among marketing,
operations and human resource functions of the firm
 Has a coherent vision of what it takes to succeed
 Strategies are defined and driven by a strong, effective
leadership team
 Responsive to various stakeholders
 Value creates through customer satisfaction
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 6
Integrating Marketing, Operations,
and Human Resources
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 7
Reducing Interfunctional Conflict
 One challenge is to avoid creating “functional silos”
 High-value creating enterprises should be thinking in terms of
activities, not functions
 Top management needs to establish clear imperatives for
each function that defines how a specific function
contributes to the overall mission
 The marketing imperative
 The operations imperative
 The human resources imperative
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 8
Defining the Three Functional Imperatives
 Marketing Imperative
 Target “right” customers and build relationships
 Offer solutions that meet their needs
 Define quality package with competitive advantage
 Operations Imperative
 Create and deliver specified service to target customers
 Adhere to consistent quality standards
 Achieve high productivity to ensure acceptable costs
 Human Resource Imperative
 Recruit and retain the best employees for each job
 Train and motivate them to work well together
 Achieve both productivity and customer satisfaction
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 9
Creating a Leading Service
Organization
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 10
From Losers to Leaders: Four Levels of
Service Performance (1)
 Service Losers
 Bottom of the barrel from both customer and managerial
perspectives
 Customers patronize them because there is no viable alternative
 New technology introduced only under duress; uncaring workforce
 Service Nonentities
 Dominated by a traditional operations mindset
 Unsophisticated marketing strategies
 Consumers neither seek out nor avoid them
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 11
From Losers to Leaders: Four Levels of
Service Performance (2)
 Service Professionals





Clear market positioning strategy
Customers within target segment(s) seek them out
Research used to measure customer satisfaction
Operations and marketing work together
Proactive, investment-oriented approach to HRM
 Service Leaders




The crème da la crème of their respective industries
Names synonymous with outstanding service, customer delight
Service delivery is seamless process organized around customers
Employees empowered and committed to firm’s values and goals
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 12
Moving to a Higher Level of Performance
 Firms can move either up or down the
performance ladder
 Organizations devoted to satisfying their
current customers may miss important shifts
in the marketplace
 As a result, they may face difficulties
attracting new consumers with different
expectations
 Companies defending their control of their
competitive edge may have encouraged
competitors to find higher-performing
alternatives
 Organizations with a service-oriented
culture may turn otherwise as a result of a
merger or acquisition that brings in new
leaders who emphasize short-term profits
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 13
In Search of Human Leadership
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 14
Leading a Service Organization
Involves Eight Stages (1)
 Creating a sense of urgency to develop the
impetus for change
 Putting together a strong enough team to
direct the process
 Creating an appropriate vision of where the
organization needs to go
 Communicating that new vision broadly
Source: John Kotter
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 15
Leading a Service Organization
Involves Eight Stages (2)
 Empowering employees to act on that vision
 Producing sufficient short-term results to create credibility
and counter cynicism
 Building momentum and using that to tackle tougher
change problems
 Anchoring new behaviours in organizational culture
Source: John Kotter
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 16
Leadership versus Management
 Leadership
 Concerned with development of vision and strategies, and
empowerment of people to overcome obstacles—make vision happen
 Emphasis on emotional and spiritual resources
 Works through people and culture
 Produces useful change, especially non-incremental change
 Management
 Involves keeping current situation operating through planning,
budgeting, organizing, staffing, controlling, and problem solving
 Emphasizes physical resources—raw materials, technology, capital
 Works through hierarchy and systems
 Keeps current system functioning
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 17
Setting Direction versus Planning
 Planning - management process, designed to produce
orderly results, doesn’t produce change
 Planning follows and complements direction setting, serving as useful
reality check and road map for strategic execution
 Setting direction - creating and articulating visions and
strategies that describe a business, technology, or
corporate culture in terms of the long term
 Many of best visions and strategies combine basic insights and translate
them into realistic competitive strategy
 See Service Persp. 15.1 : Can Cirque du Soleil Stretch
Further?
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 18
Individual Leadership Qualities
 Visualize quality of service as foundation for
competing
 Able to believe in their employees and make
communicating with them a priority
 Love of the business
 Driven by a set of core values that they
infuse into the organization
 Need not be charismatic, but has to be
principled
 Must have personal humility blended with
intensive professional will, ferocious
resolve, and willingness to give credit to
others but take blame themselves
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 19
Change Management
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 20
Evolution versus Turnaround (1)
 Evolution involves continual mutations designed to ensure
the survival of the fittest
 Top management must proactively evolve the focus and strategy of
the firm to take advantage of changing conditions and the advent of
new technologies
 Turnaround situations are where leaders seek to bring
distressed organizations back from the brink of failure and
set them on a healthier course
 Example: Amex (Service Perspectives 15.2)
 Can be advantageous to bring in a new CEO from outside the
organization
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 21
Evolution versus Turnaround (2)
 Hurdles that leaders face in reorienting and
formulating strategy
 Cognitive hurdles
 Resource hurdles
 Motivational hurdles
 Political hurdles
 Turning around an organization that has limited
resources requires concentrating those resources
where the need and the likely payoffs are greatest
 A firm’s search for growth often involves expansion—
even diversification into new lines of business
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 22
Role Modeling Desired Behaviour
 “Management by walking around”
 Provides insights to both backstage and front-stage operations
 The ability to observe and meet both employees and customers, and
opportunity to see how corporate strategy is implemented on the
front line
 Best Practice In Action 15.2
 This approach may lead to a recognition that changes are
needed in that strategy
 A risk of prominent leaders becoming too externally
focused at the risk of their internal effectiveness
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 23
Leadership, Culture, and Climate (1)
 Leadership traits are needed of everyone in supervisory or
managerial positions, including those heading teams
 Effective communication is essential for a leader
 Organizational culture
 Shares perceptions or themes regarding what is important in the
organization
 Shares values about what is right or wrong
 Shares understanding about what works and what doesn’t work
 Shares beliefs, and assumptions about why these things are
important
 Shares styles of working and relating to others
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 24
Leadership, Culture, and Climate (2)
 Organizational climate
 The tangible surface layer on top of the
organization’s underlying culture
 Factors of influence:
― Flexibility, responsibility, standards that people set,
perceived aptness of rewards, clarity people have
about mission and values, level of commitment to a
common purpose
 Creating a new climate for service, based
on understanding of what is needed for
market success, may require
 Radical rethinking of HRM activities,
operational procedures, and the firm’s reward
and recognition policies
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 25
Summary – Chapter 15 (1)
 The service-profit chain targets new investments to develop service
and satisfaction levels for maximum competitive impact
 Widens the gap between service leaders and merely good competitors
 Marketing, operations and human resource management need to be
integrated by reducing interfunctional conflict and setting imperatives
for each function
 Evolutionary change is ongoing mutation and adaptation, while
turnaround is bringing an organization back from the brink of disaster
 Service leaders play an essential role in fostering success by being role
models, effective communications, sharing values and beliefs and
creating a climate for service
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 26
Summary – Chapter 15 (2)
 Strategies to move a firm toward status of world class
service delivery
 Mutual dependence among marketing, operations and human
resources
 Deliver superior value and quality
 Marketing strategies that beat the competition
 Viewed as trustworthy and ethical
 Outstanding place to work
 All actions are well coordinated
 All managers participate in strategic planning
Copyright © 2008 Pearson Education Canada
Services Marketing, Canadian Edition
Chapter 15- 27