27 Managing Service Productivity

Dr. Puja Waalia Mann

 

26. 1.0 Introduction

 

The simple meaning of the term productivity is the effectiveness with which the inputs are transformed into the outputs. While judging the productivity of any process, the input and output ratio is evaluated to conclude whether or not the process if productive. Evaluation of productivity for the physical products is a very frequently undertaken activity with a number of tools used for measurement including the monetary and value creation methods. On the contrary, the underlying assumptions of tolls for measurement does not hold true and hence evaluation of productivity becomes difficult. For instance, the productivity models in manufacturing holds that any change in the combination of inputs does not change the level of quality of the outputs. Here, we take the assumption that the quality is constant. Whereas, in the context of services, any change in the process of production brings about a change in the perceived quality of the services being offered. Thus, while the concept and importance of measuring productivity remains true for both goods and services, there is an inherent difference between the assumptions and tools for evaluating the service productivity. In this module, we shall understand the concept of Productivity in Services.

 

 

1.1 Learning Objectives

 

In this module, you will learn:

 

a)      Meaning of Productivity

b)      Difference in measuring productivity for Goods and Services

c)      Cost reduction and Productivity in Services

d)      Service Innovation and Productivity

e)      Managing Waiting Lines and Productivity

f)       Customer Complaint Handling and Productivity

g)      Service Productivity model

 

1.2 Key Words:

 

Service productivity, Service Management, Internal efficiency, External efficiency, Capacity efficiency, Service productivity model

 

1.3 Introduction to Productivity in Goods and Services

 

The term productivity refers to the comparison of the inputs and outputs of any production process. Productivity can be considered as a concept which is used for the purpose of measuring the efficiency of the manufacturing process. In manufacturing processes, the term productivity refers to the degree of efficiency in which the input resources are transformed into outputs. A higher productivity would mean profitable position for the organization, thereby value for money for the consumers. Such a concept assumes Quality to remain constant at the input and at the output stage of production. Since the creation of quality varies in services from the inputs stage to the output stage due o many factors, measuring productivity becomes a difficult task. Also, it is rarely feasible to define and calculate the value of one unit of service. Let us assume, that a hotel manager wants to assess the time input in attending to a customer by a housekeeping employee. It may be very difficult to assess the exact time taken to serve one customer, as the needs of each customer may be different thus requiring different time to resolve. Though an understanding of this time study may provide some useful insights into the customer service, they may fail to provide any relevant information about the productivity aspect of the input effort leading to consumer value creation. The concept of productivity in services becomes complicated as the creation of services is an open system where the consumers too are active participants of the service creation. Managing productivity in services, thus, is a mutual learning experience in which the service seller and the service consumer constantly align their resources and understanding of the process to gain mutual benefits. Further, in services a changed configuration of the inputs may lead to a varied perception of service quality amongst different customers on both the dimensions of technical quality or functional quality. Hence, even when the service organization brings about some changes in the service inputs for better results, there is no guarantee that the changes will lead to positively perceived service quality. Infact at times, it may lead to a reduced quality perception adversely affecting the organizational profitability and consumer value. For instance, let us assume that a restaurant manager aims to reduce the cost of service production so as to make the input resources as efficient. For this purpose, several costs cuts are initiated. However, this starts to adversely affect the customer’s level of satisfaction, eventually resulting negatively in the restaurants profitability. In this situation, if the intention of brining in efficiency in the input resources leads to a fall in the profitability, this means that there is no improvement in productivity. We may also say that the cost reduction has not shown effective results.

 

1.4 Cost reduction and Productivity in Services

Before we move ahead in the discussion of Productivity in managing services, let us look at the concept of Cost reduction and analyze if it has any relation with Productivity. Cost reduction refers to a series of tasks undertaken in the process of services to reduce the overall unit cost of creating and delivering a service to the target consumer. In simple terms, it is the overall decrease in the monetary input of producing and delivering a service. Let us take for example, when the banks open ATMs or enable its consumers to do certain banking transactions on Internet at his own convenience, the primary aim may have been to save the banking personnel from the work load and shift some of the routine baking processes on an automated mode. This facilitates the bank to save on the most expensive costs of manpower. In this situation, if opening up of ATM and Internet or mobile banking facilitates in the improvement of the consumer convenience thereby leading to increase in his satisfaction level, the banking reform has been productive. This means that while cost reduction refers to only the decrease in the monetary input, productivity goes beyond cost and aims to satisfy the consumer for the long term profitability of the service organization.

 

Similarly, you may like to discuss any other example. Let us say that a property dealer starts functioning through a mobile app to show the visualization of any building or space for sale or rent. He is aiming to cut the cost of travelling and showing various places in person to the prospective consumer. However, if the potential consumer is not satisfied with the virtual images and does not feel convinced of any location or site without personally visiting it, the overall productivity of the Property dealer is set to come down.

 

For Service organisations, it is important to understand that merely cost cutting may or may not lead to enhancement in the service productivity. The organisation should focus to improve the consumer satisfaction while attempting to propose any cost reduction measure in service production and transaction. If any attempt of cost cutting results in the deteriorating perception of the service quality, thereby leading to a reduced customer satisfaction, they may start looking for other options in the service providers category. This would result in decreased profitability of the service firm in question and hence, end up losing its productivity. It is important to note here that the cost cutting may have actually enhanced the productivity but if it perceived as reduced quality by the consumers, the firm loses its customers. Therefore, the level of satisfaction of the consumers and the level of perceived service quality are the determinants of Service productivity.

 

CHECK YOUR PROGRESS

 

1.       “Measuring Service productivity in quantitative terms is not possible.” Do you agree? Why/ Why not?

2.       Define Productivity, with the help of an example.

3.       Differentiate between Productivity in manufacturing process and Services. Describe with the help of an example.

 

1.5 Service Innovation and Productivity

 

Service Innovation is an attempt by the service marketer to offer something different and attractive to the service consumer with the aim to delight him. While the core benefit being offered in the service should not be diluted or compromised with, value addition in a creative form can increase the consumer base of a service firm leading to higher profitability. Service Innovation, in simple terms, refers to the creative, unique and a new way of offering a service to the target consumer. Newness can mean some new feature of the service or an improved feature or process of service delivery. Sometimes, Innovation can also refer to a service design perceived to be new for a market segment. Whenever a new feature of a service design is offered to a consumer, there is a tendency to try it. An attractive and a useful innovation can increase the consumer base and therefore, result in higher sales and profitability of the service firm. With the advent of revolutionary improvements in technology , especially with the coming of Internet, service marketers have been able to offer a variety of service innovations like the Automatic Teller Machines (ATM), Debit cards and Credit cards by the Banks; Mobile app based shopping by various retailers; Ticket sale by multiplexes, railways, Airways and other public transport; On demand house hold services like car cleaning, Electric repair, plumber and carpenter services to name just a few. None of the service sectors has remained aloof of the service innovations today. All the more due to the hectic lifestyles of the average Indian consumer, new services like depositing the various household bills and children’s fees are also flourishing in the metro areas where the double income nuclear families find it difficult to take out time for such work. It is important for service provider to ensure that the innovations offered should aim to enhance the quality service experience of the consumer so as to enhance Service productivity. Service innovations can be done at various components of the services like at the core benefit level, service ordering level, service creation and delivery level, service process, physical evidence, service personnel or at the service consumption level. This experience can be made pleasant by making the service ordering and consumption convenient or saving the time of the service production and delivery. However, it is important to note that not all innovations may lead to an increased productivity. Further, the cost of research and development of a service innovation may not be met by the expected profits after its introduction. Service marketer must be very cautious is trying to design an innovation and present it to the consumer. There are many examples of productive innovations in a number of sectors like Banking, Transport, Entertainment, Retail, etc.

 

1.6 Managing Waiting Lines and Productivity

 

Waiting in a line for getting serviced for something is not only boring it is also frustrating as it wastes a lot of time of the consumer and may even be physically uncomfortable. Despite this, one has to wait on several occasions starting at a Bank or a restaurant or even wait on phone or internet for various service processes. Almost every successful service organization faces the complaints of waiting. Smart service organizations know that improvement in business may increase the waiting lines, which needs to be managed before they start adversely affecting the service productivity. Two very frequently used methods of managing the waiting lines adopted by the service organizations is to ask the consumers to have patience and wait in line to be served on first come basis. The second method could be to offer the consumers get an appointment or book their interaction before coming on phone or on web. A service manager can identify various means to manage the waiting lines. However, the choice of the means of managing waiting line should be directly related to its affect on the consumer’s level of satisfaction rather than the free will of the service managers. Productivity of Services are directly affected by the waiting lines as long queues adversely affect the level of satisfaction of the consumers. It may be said that managing waiting lines efficiently would frequently result in improving the productivity of the Service firms.

 

1.7 Customer Complaint Handling and Productivity

 

While marketing intangible services, the seller attempts to create an image of the service in the minds of the potential consumer. If the actually delivered service quality does not meet the expected level of quality by the service, the consumer will be dissatisfied, thereby deteriorating the Service Productivity. Many a times, the service may be as per the expectations, but the behavior of any service staff or the working or performance of any support gadget may cause inconvenience to the consumer. There could be a situation where after the service consumption, the consumer may not think the worth of the service equal to the price he paid for the same. Due to any of the above mentioned reasons, a consumer could be dissatisfied and may have a reason for a complaint, which is the biggest symptom of reduction in the Service Productivity. A good service organization ensures the creation and implementation of a formal customer complaint handling system which encourages and welcomes the complaints as learning feedback from the dissatisfied consumers. This feedback helps organizations to upgrade their services and enhance the quality of services delivered. The smooth implementation of a well intentioned complaint system requires training of the staff in dealing with the complaining consumers and requisite authority to the complaint management executive to rectify the mistake and ensure that the consumer walks off the organization pleased. For this, the complaining consumer needs to be addressed politely and facts should be gathered to address the concern of the consumer. These efforts on the part of the Service organization facilitates in enhancing the service productivity by listening to the complaining consumers and offering them the solution that delights them.

 

CHECK YOUR PROGRESS

 

4.      How can Service innovation affect Service productivity?

5.      Can effective management of waiting lines enhance Service Productivity? How?

6.      What impact will customer complaint handling system have on Service Productivity?

 

1.8 Service Productivity model

 

We have discussed how the models and assumptions of productivity in manufacturing may not hold true for the service sector. Also it has been discussed that only on the basis of financial input or output quantity, the productivity of the services cannot be measured. Due to the inherent nature of the services and the associated processes of services, the resulting consumer satisfaction, as perceived by the consumer himself, has to be an integral aspect of measuring the service productivity. Moreover, as services cannot be stored, there is yet another factor which affects the productivity, that is the capacity management to meet the excess demand or to utilize the excess capacity. Thus, the productivity in services is considered to be a function of efficiency of transformation of input resources into final services; perception of the quality of services by the consumers; and effectiveness of the utilization of the service process. We may show these three concepts as below:

In the above figure, there are three broad components of Service Productivity:

 

a) Internal efficiency– The internal efficiency refers to the ability of the service organization to transform the limited inputs into the desired quality services. In the internal efficiency, there are two aspects to the Input of the system. One is the inputs of the service providers, which includes his service personnel, the service creation and service delivery technology and system, the time and information required to complete a service transaction efficiently. These are the inputs where the service differentiation can be sought to be done by the service marketer. For example, a service marketer may have a well trained and courteous staff due to which the consumers service experience is better than the other service player. Eureka Forbes had always differentiated its services on the service personnel’s interaction with the target customers.

 

The second aspect of the Inputs are the customers inputs. This means this is the participation of the customer in the creation and production of the service. It also includes the participation and contribution of the fellow customers in the service creation process. Assuming that a cruze will only sail if there are a specific number of consumers on board or a movie show will only run in a multiplex if there are a given number of audience in the hall, the participation and behavior of the fellow consumers plays a very significant role.

Fig 26.1 A Service productivity Model

 

b) Service process– the second step in the Service productivity model relates the process of producing a service. There could be three different variations for the production of the service.

 

i) Back Office– Such type of a service provider develops a service for a potential consumer in isolation of the customer. That means the participation of the customer is not needed for the purpose of creation of the service. For instance, for a car service, the customer contribution is not required and the service provider’s personnel themselves produce the service using the organizational resources.

 

ii) Service encounter– These are the services which are developed and consumed with the interaction between the service producer and the service consumer. For example, in a coaching centre, a student is preparing for a higher level of competitive exams. The service is created and consumed i.e. the teaching is done as per the needs and intelligence level of the student and learning is directly associated with the interest that a student gets in the content and his ability to grasp. Thus, the interaction of both producer and consumer of the service is required.

 

iii) Service Support– this is the third type of service process. In this process, the consumer makes use of the marketers infrastructure and guidelines and consumes the service in isolation. For example, while watching a movie in a theatre, the consumer enjoys the movie on his own taking advantage of the infrastructure of the service provider. Similarly, for a gym going consumer, he makes use of the facilities of the gym and consumes the service with only his own participation to work out.

 

In the figure shown above, it is important to note that the service providers inputs viz. technology, personnel, time, information and systems directly affects the Back-office and Service encounter service process, as is shown in bold arrows. This is so because the service provider is to a great extent influencing the service process directly. On the other hand, he is indirectly affecting the service support service process as the consumption of the service depends upon the consumer but the service marketer only providers the required infrastructure. Thus it is connected with a dotted arrow.

 

In the same way, the consumers influence is direct and more strong in the Service encounter and service support, while it is less and indirect in t he Back-office service process due to the varying degrees of role that he plays in each of these situations.

 

c) External Efficiency – The resulting aspect of the service process is the output, which is known as the External efficiency. There are two important variables to be understood here- the Quality and the Quantity. The service output quality is judged by the service process and the efficiency of the service personnel delivery performance in comparison to the perception of the consumer and his own needs and expectations with the services. The quantity is directly dependent upon the demand of the service by the target market.

 

d) Capacity Efficiency – Let us now look at the most significant part of this model that is the Capacity Efficiency which is also referred to as the capacity utilization. The capacity efficiency is a result of the internal and external efficiency resulting in the Service productivity. In simple terms, it can be said that the Service Productivity is the function of internal efficiency, External efficiency and Capacity efficiency.

 

CHECK YOUR PROGRESS

  1. Describe Service productivity Model.
  2. Explain:
    1. a) Internal efficiency
    2. b) External efficiency
    3. c) Capacity utilisation

 

Conclusion

 

Quality and productivity are two important aspects of the service transaction. While Service quality is an intangible aspect of service performance and its comparison with the consumer perception of and his needs and expectations; Service productivity is a related concept of comparing the input – output ratio of a service creation to ensure a positive consumer perception. The term productivity refers to the comparison of the inputs and outputs of any production process. We have discussed how the models and assumptions of productivity in manufacturing may not hold true for the service sector. Also it has been discussed that only on the basis of financial input or output quantity, the productivity of the services cannot be measured. Due to the inherent nature of the services and the associated processes of services, the resulting consumer satisfaction, as perceived by the consumer himself, has to be an integral aspect of measuring the service productivity. Moreover, as services cannot be stored, there is yet another factor which affects the productivity, that is the capacity management to meet the excess demand or to utilize the excess capacity. Thus, the productivity in services is considered to be a function of efficiency of transformation of input resources into final services; perception of the quality of services by the consumers; and effectiveness of the utilization of the service process.

 

Summary

 

In this module, we have seen that the term productivity refers to the comparison of the inputs and outputs of any production process. Productivity can be considered as a concept which is used for the purpose of measuring the efficiency of the manufacturing process. Managing productivity in services, thus, is a mutual learning experience in which the service seller and the service consumer constantly align their resources and understanding of the process to gain mutual benefits. Further, in services a changed configuration of the inputs may lead to a varied perception of service quality amongst different customers on both the dimensions of technical quality or functional quality. Hence, even when the service organization brings about some changes in the service inputs for better results, there is no guarantee that the changes will lead to positively perceived service quality. We have also discussed the relation of cost reduction and Productivity. Cost reduction refers to a series of tasks undertaken in the process of services to reduce the overall unit cost of creating and delivering a service to the target consumer. In simple terms, it is the overall decrease in the monetary input of producing and delivering a service. Similarly, marketers can attempt to increase service productivity through Service innovation and design. Service Innovation is an attempt by the service marketer to offer something different and attractive to the service consumer with the aim to delight him. Service productivity is also influenced by the way Waiting lines are managed. Smart service organizations know that improvement in business may increase the waiting lines, which needs to be managed before they start adversely affecting the service productivity. Lastly, if the actually delivered service quality does not meet the expected level of quality by the service, the consumer will be dissatisfied, thereby deteriorating the Service Productivity. Hence consumer complaint handling is yet another feature to ensure improved service productivity.

 

Learn More:

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