Management Control Systems (2nd Edition)

Management Control of Service Operations : Overview

The service blueprint is a detailed representation of the service delivery process, the associated physical evidence, and the employees involved in the service delivery process. Blueprinting can help service organizations in lowering costs and increasing profitability by giving clues on how many people need to be recruited, trained, etc. It also helps to map the time that may be spent on each activity, which helps the employees in better time management.

Capacity management, service quality, and productivity are the three factors on which service operations are planned and controlled. Capacity management deals with managing the demand and supply of services to the customers. To manage capacity, organizations use different strategies such as customer development, bundling, and differentiation. Yield management, also known as revenue management, is a method that can help an organization sell the right inventory unit to the right type of customer, at the right time, and for the right price. Yield management is often done using economics-based models or by constructing threshold curves. Mathematical programming models or expert systems can also be used for yield management.

Service quality is a critical factor that influences the business and profitability of a service organization. The three main components of service quality are: physical facilities and processes, people’s actions, and professional opinion, which form the three Ps of service quality. From a customer perspective, the determinants of service quality are: reliability, competence, access, responsiveness, credibility, courtesy, communication, security, understanding the customer, and tangibles. Service quality is evaluated through a service quality audit or through customer feedback. Six Sigma can be used as a management technique for improving service quality.

Service recovery is a set of activities that an organization undertakes to rectify the issues faced during delivery of the service. A service organization's business is greatly affected by the results of the service recovery process. A positive result in service recovery will help improve business while a negative result would lead to loss of business. To improve the complaint handling process, organizations should have a good service recovery program in place. To reduce customer switching, organizations can use service recovery to address service failure issues such as core service failures, service encounter failures, price failures, inconvenience, and employee response to service failures.

The different dimensions on which the service organizations differ from each other are - equipment focus / people focus; product focus / process focus; level of customization; back office focus / front office focus; duration of customer contact; and level of discretion. Based on the degree of variation in the services and the relative throughput time, service organizations are classified into four categories – professional services (high degree of variation, high relative throughput time), mass services (low degree of variation, high relative throughput time), service shops (high degree of variation, low relative throughput time), and service factories (low degree of variation, low relative throughput time).

The dimension 'degree of variation' has its implications for managing service quality. On the other hand, the throughput time dimension is the dimension associated with the productivity aspect of the services. The higher the throughput time, lower will be the productivity. The process productivity increases when there is uniform and quick flow of material, information, or activities and decreases when the uniformity is low either due to the quality requirements, quantum of work, or timing-related fluctuations. Control in the different services generally deals with the productivity and service quality aspect of the service being offered. To simultaneously increase both productivity and service quality, managers may try to reduce both the relative throughput time and the degree of variation.

The differentiating characteristic of professional service organizations is that employees are highly skilled/ educated. They are empowered and take decisions independently. The high dependency of the professional service organizations on the service provider makes it important for the organizations to focus on human resource management. It becomes necessary for the organization to be careful and choosy about the people it hires. Activities like training programs and welfare programs become important.

Mass services are characterized by a low degree of variation and high relative throughput time. The throughput time can be reduced by identifying and eliminating the sources of 'waste', such as lack of accurate data, inconvenient locations of the facilities delivering the services, waiting, unnecessary steps in the process, and defects in the product/service. The focus of the mass services should mainly be on reducing the wastes so as to achieve lower throughput time and higher productivity, thus moving the organization toward the service factory quadrant. Such an elimination of wastes can also result in higher service quality in terms of reliability, accessibility, responsiveness, etc. Tangibles, responsiveness, competence, access, and reliability are the important service quality determinants for mass services.

Service shops are characterized by a high degree of variations and lower relative throughput time. The issue in controlling the service shops generally focuses on reducing the variations through standardizing the services and trying to spread the overhead costs over a greater number of service units without compromising on the throughput time, that is, without affecting the responsiveness dimension of service quality from the customer perspective.

Service factories are service organizations that are characterized by a low degree of variations and low relative throughput time. The service factories (e.g., low cost airlines) are expected to be more productive than other categories (e.g., full services airlines) of service organizations in the same industry. In case of service factories, the service quality determinants that are to be considered important are - tangibles, responsiveness, recovery, and competence.

Chapter 13 : Overview