1. Managing People
for Service Advantage

2. Hire the Right People
“The old saying „People are your most
important asset‟ is wrong.
The RIGHT people are your most
most important asset.”
Jim Collins

3. The Cycles of Failure, Mediocrity and Success
Too many managers make short-sighted assumptions about
financial implications of:
 Low pay
 Low investment (recruitment, training)
 High turnover human resource strategies
Often costs of short-sighted policies are ignored:
 Costs of constant recruiting, hiring & training
 Lower productivity & lower sales of new workers
 Costs of disruptions to a service while a job remains unfilled
 Loss of departing person‟s knowledge of business and customers
 Cost of dissatisfied customers

4. Cycle of Failure
Customer
turnover Repeat emphasis on
attracting new customers
Failure to develop
customer loyalty
Low profit
margins Narrow design of
jobs to accommodate
low skill level
High employee turnover;
poor service quality
No continuity in Use of technology Emphasis on
relationship for to control quality rules rather
customer Employee dissatisfaction; than service
poor service attitude
Payment of
low wages
Employees Minimization of
become bored selection effort
Customer
dissatisfaction Minimization
of training
Employees can’t
respond to customer
problems
Source: Schlesinger and Heskett

5. Employee cycle of failure
 Begins with a narrow design of jobs to accommodate low skill levels, an
emphasis on rules rather than service and the use of technology to
control quality
 Strategy of low wages is accompanied by minimal effort on selection of
training
 Consequences include bored employees who lack the ability to respond
to customer problems,become dissatisfied and develop a poor service
attitude.
 Outcomes for the firm are low service quality and high employee
turnover
 Because of weak profit margins, the cycle repeats itself with the hiring of
more low paid employees to work in this unrewarding atmosphere

6. Customer cycle of failure
 Begins with repeated emphasis on attracting new customers
 Become dissatisfied with employee performance and the
lack of continuity implicit in continually changing faces
 These customers fail to develop any loyalty to the supplier
 This requires an ongoing search for new customers to
maintain sales volume.

7. Cycle of Success
Low
customer
turnover Repeat emphasis on
customer loyalty and
retention
Customer
loyalty
Higher
profit
margins
Broadened
Lowered turnover, job designs
high service quality
Continuity in
relationship with Train, empower frontline
customer Employee satisfaction, personnel to control quality
positive service attitude
Above average
Extensive wages
training
High customer Intensified
satisfaction selection effort
Source: Heskett and Schlesinger

8. Strategies for managing people

9. The Wheel of Successful HR in Service Firms
Leadership that:
Focuses the entire organization 1. Hire the
on supporting the frontline Right People
Fosters a strong 3. Motivate & Be the preferred
service culture with
Energize Your People employer & compete
passion for service
and productivity for talent market share
Drives values that Service Excellence Intensify the
Utilize the full selection
inspire, energize range of rewards
& Productivity
and guide service process
providers
2. Enable Your People
Empower Frontline
Build high performance service
delivery teams
Extensive Training

10. Recruitment
 The right people are a firm‟s most important asset: take a
focused, marketing-like approach to recruitment
 Clarify what must be hired versus what can be taught
 Clarify nature of the working environment, corporate values
and style, in addition to job specs
 Ensure candidates have/can obtain needed qualifications
 Evaluate candidate‟s fit with firm‟s culture and values
 Fit personalities, styles, energies to the appropriate jobs

11. Select And Hire the Right People:
(1) Be the Preferred Employer
Create a large pool: “Compete for Talent Market Share”
 What determines a firm‟s applicant pool?
 Positive image in the community as place to work
 Quality of its services
 The firm‟s perceived status
 There is no perfect employee
 Differentjobs are best filled by people with different skills, styles or
personalities
 Hire candidates that fit firm‟s core values and culture
 Focus on recruiting naturally warm personalities

12. Select and Hire the Right People:
(2) How to Identify the Best Candidates
 Observe Behavior
 Hire based on observed behavior, not words you hear
 Best predictor of future behavior is past behavior
 Consider group hiring sessions where candidates given group tasks
 Personality Testing
 Willingness to treat co-workers and customers with courtesy,
consideration and tact
 Perceptiveness regarding customer needs
 Ability to communicate accurately and pleasantly

13. Select and Hire the Right People:
(3) How to Identify the Best Candidates
 Employ Multiple, Structured Interviews
 Use structured interviews built around job requirements
 Use more than one interviewer to reduce similar to me effects
 Give Applicants a Realistic Preview of the Job
 Chance to have “hands-on” with the job
 Assess how the candidates respond to job realities
 Allow candidates to self select themselves out of the job

14. Enable your people
 The Organizational Culture, Purpose and Strategy
 Promote core values, get emotional commitment to strategy
 Get managers to teach “why”, “what” and “how” of job.
 Interpersonal and Technical Skills
 Both are necessary but neither is sufficient for optimal job
performance
 Product/Service Knowledge
 Staff‟s product knowledge is a key aspect of service quality
 Staff need to be able to explain product features and to position
products correctly

15. Factors Favoring Employee Empowerment
 Firm‟s strategy is based on competitive differentiation and on
personalized, customized service
 Emphasis on long-term relationships vs. one-time transactions
 Use of complex and non-routine technologies
 Environment is unpredictable, contains surprises
 Managers are comfortable letting employees work independently
for benefit of firm and customers
 Employees seek to deepen skills, like working with others, and
are good at group processes

16. Motivate and Energize the Frontline
Use the full range of available rewards effectively,
including:
 Job content
 Feedback and recognition
 Goal accomplishment

17. The Inverted Organizational Pyramid
Customer Base
Top
Mgmt Frontline Staff
Middle
Mgmt
Middle Mgmt
Frontline & Top Mgmt
Staff Support Frontline
Traditional Inverted Pyramid with a
Organizational Pyramid Customer & Frontline Focus
Legend: = Service encounters, or „Moments of Truth.‟

18. Service-Profit Chain Model
• Most applicable to service environments.
• Model is based on a set of cause and effect
linkages between internal and external
performance, and defines the key performance
measurements on which service-based firms
should focus.

19. The Service-Profit Chain Model
Source: Adapted from J. L. Heskett, T. O. Jones, G. W. Loveman, W. E. Sasser, Jr., Jr., and L. A. Schlesinger,
“Putting the Service-Profit Chain to Work,” Harvard Business Review, March–April 1994, pp. 164-174.

20. Causal Links in the Service Profit Chain
 Customer loyalty drives profitability and growth
 Customer satisfaction drives customer loyalty
 Value drives customer satisfaction
 Employee productivity and retention drive value
 Employee loyalty drives productivity
 Employee satisfaction drives loyalty and productivity
 Internal quality drives employee satisfaction
 Top management leadership underlies chain‟s success